To Stanley P. Hayes:  Greetings.  You ask book-length questions, but I'll
try some on anyway.  1.  def. of literacy:  I like what Brian Street says
as one among thousands (Social Literacies:  Critical Approaches to
Literacy in Development, Ethnography and Education.  NY:  Longman, 1995)
"Heath defines a 'literacy event' as 'any occasion in which a piece of
writing is integral to the nature of participants' interactions and their
interpretive processes' (Heath,Ways With Words, 1983). I [Street] employ
'literacy practices' as a broader concept, pitched at a higher level of
abstraction and referring to both behavior and conceptualizations related
to the use of reading and/or writing.  Literacy practices incorporate not
only 'literacy events', as empirical occasions to which literacy is
integral, but also 'folk models' of those events and the ideological
preconceptions that underpin them."  The mephasis for me within this
partial definition is 'ideological preconceptions' and I refer you to
James Gee for a full discussion of that.
2.So many steps are being taken to encourage students to read, from the
professional involved (phonics vs whole language 'methods'), from the
existence of TV (sells more books than booksellers, but also
controversial), and from the general public who believes in the importance
of reading, that your question itself is bewildering.  Can't you narrow
it?
3."The most effective way to teach grammar" is a phrase which so
desperately needs to be unpacked that I am at a loss where to start.  Have
you read any of the (so-called) research or conclusions of studies on
teaching grammar?  Have you defined grammar for your purpose here? (even a
loose def.--but something).  At least one smart-aleck I know would say
that the most effective way is to wait until the person shows an interest
in studying the subject formally before beginning to "teach" grammar at
all.
4. I would change your engagement question to read, How to keep them
engaged in learning from and with each other?  Plan a program where
students do things with language (talk, write, experiment, publish,
interview, etc.).  You can wow Louisville KY by planning a
reading/skimming program for yourself on these topics--to be done in a
crash program of 10 days.  Yes?