This has been an intereting dilemma with some all for it and others not. I've grappled with this, but have found a way of looking at it which has helped my students and me.

When I teach short story to my ESL students, I read aloud the first story so they can see what the punctuation means. It also gives me a chance to demonstrate rhythm and the impact of shorter and longer sentences. Then I have them read the story alone a few times so they can work through vocabulary and the meaning of the story. After that a lot of time is spent on the text, including connecting the character, plot and theme to their own worlds. What initially seems overwhelming is given a lot of process time and I can see a dramatic difference in their curiosity about the language. 
I only ask students to read aloud if it is a short passage, they have had time to rehearse with me and everyone has agreed that this is HARD and it is a risk for everyone, so respect is expected. I learned this from my grade 2 practicum teacher who did have her students read. 
I think the key is giving time both to the skill, as well as the story/text itself if it is to be relevent to the students. It also gives me a good sense of their progress with the language, because as someone earlier noted, when they read in their head or possibly translate, I don't know for sure if they understand what I intend them to. 
emma

Emma Bourassa
English as a Second or Additional Language/ Teaching English as a Second Language Instructor
ESAL Department
Thompson Rivers University
900 McGill Road. P.O. Box 3010
Kamloops, B.C. V2C 5N3
(250) 371-5895
fax 371-5514
ebourassa at tru.ca