One sweet rainbow book for preschoolers is A Rainbow of My Own by Don Freeman (author of the Courdory books). In this story, a boy observes a rainbow after a storm and goes out to play with it. While he can't actually find a rainbow, he imagines a rainbow and has lots of fun playing with his imaginary rainbow. The boy comes home and uses a prism and his goldfish bowl to create a rainbow of his very own in his room.
After reading the book, we made our own rainbow-- though not with a prism as they do in the book. We'll leave that science experiment for Grandpa's house. (My dad is a retired science teacher turned most amazing Grandpa in the world). I decided a fun way to make our own rainbow was to use a part of our bodies and create handprint rainbows. I found this idea over at Mama Mia's Heart 2 Heart.
For these rainbow, use the pinky and the side of your child's hand to create a rainbow arc. As the arcs get smaller, use one hand instead of two. For the violet arc, we just used a thumbprint. After we painted our rainbow, we used our handprints in white paint to make clouds. You can also use your fists for the clouds.