Just recently finished The Enchantress Of Florence by Salman Rushdie, and have to say I was hugely impressed. It's only the first Rushdie book I've read (I think maybe I was put off by the bad reviews of The Satanic Verses in some quarters) but I'll be looking for more now. Real magic realism stuff (a tiny bit Paolo Coelho's 'The Alchemist' meets Umberto Eco's 'The Island Of The Day Before' if that helps), the word-imagery he weaves is astonishing at times.
At the moment am re-reading Three Men In A Boat by Jerome K Jerome again, and cannot recommend it highly enough to anyone, even if you don't generally read novels. Everyone should read this at least once, it's just a wonderful little book, full of brilliantly observed and often deliciously understated humour all the way through. Certainly would be in the top handful of comic novels of all time.