I have almost given up on finding a children's book from my past. I
don't know the title or author. It has been almost 20 years since I've
seen this book, so hopefully my memory isn't too distorted. Please
help!
The story is about a small child who is distracted while playing
outside with his mother. A goblin takes the child to its clan inside
of a cave. I remember the illustrations were exceptional in their
detail. The colors were dark browns and greens and the pictures were
very soft. The illustrations were so crisp it was as though they were
photographs. I also remember the goblins were wearing cloaks, and I
believe the child was bald. The mother was wearing a bonnet, and I
distinctly remember a German Shepard.
I believe the mother was distracted from watching her son because she was
reading a letter from her husband who was away at war (but this could be way off).
This book was a bit eerie to me which is, in part, why I liked it so much. 
Hopefully someone will remember this story!

Hello.

I believe that you're thinking of "Outside Over There" (1981) by Maurice Sendak.

See Amazon.com:
http://www.amazon.com/exec/obidos/tg/detail/-/0064431851/

Numerous factors point to this being the right book:

-It's about a small child taken by goblins.
-The child is basically bald
-The illustrations are crisp.
-The colors are greens and browns
-The mother wears a bonnet (See her using "Look Inside" on Amazon).
-"Papa was away at sea" (according to the text with "Look Inside").

There's also a German shepherd in the book.  This is mentioned by
author Maurice Sendak in this interview:

"Sendak... Now, in Outside Over There, the mother's sitting in her
grove, with a German shepherd. The goblins right in front of the
German shepherd are carrying a ladder to the house to take the baby
away from Ida, and the German shepherd is looking benignly into the
landscape. So I was saying, "What a goof-off German shepherd, of no
value whatsoever."
source:
UC Berkeley: They Know Everything: Children and Suffering
http://ls.berkeley.edu/dept/townsend/pubs/OP05_Changelings2_top.html

-------
search strategy:
library of congress catalog, goblins
http://catalog.loc.gov/cgi-bin/Pwebrecon.cgi?v3=1&DB=local&CMD=010a+79002682&CNT=10+records+per+page

I hope this helps.

Thanks so much to juggler! I'm very impressed with this set-up and
will continue to use it. Can I request the same researcher again?

Yes, you can request me again.  Just put "attn: juggler-ga" in the
subject line of the question. Thanks.
-juggler

Amazing, just reading the description, even though I have never seen
this book, I thought, "hmmm, sounds like Maurice Sendak..."