One of the first things they said "the restaurant that gives free books is just south of the Connecticut-Massachusetts state line." With a bit of delving with Google Maps, we discovered that the restaurant is called the Traveler Restaurant, and 25 years later, it's still there.
The Traveler was a fairly standard roadside New England restaurant; I remember their New England clam chowder, but not much else. What made them special, though, was that you could get a free book with every meal from their many shelves of books around the place. The books were used, of course, and it wasn't always possible to find an interesting book, but it was a delightful place for our bibliophile family.
My parents don't remember the food as being exceptional--it's possible that the major draw was the chance to distract me with a book for the length of a meal. Even so, I'm glad that such a place exists; it's a charming combination.
http://www.hiddenboston.com/TravelerRestaurant.html is someone else's writeup of the Traveler Restaurant.