You don't ever need to apologize for questions, Ilanna! We're here to support each other.

Using the search bar for specific questions will yield a bounty of results, but - just in general - here's the deal:
I can't answer with authority whether the PB market is good, but can say the PB market seems to have strengthened considerably in the last ten years (when the children's market was soft, due to the recession). The current market for non-fiction PBs, chapter books, and MG novels seems to be stronger than that for fiction PBs, but there is always a market for an excellent story.
As for your questions about the particulars of dealing with hiring and working with an illustrator, unless you intend to self-publish, you only submit the text - just as you've done with your novels. If your story is acquired, the publisher will hire the illustrator. (You and the illustrator will have separate contracts.)
Now for some things to consider about your short story: Is the main character a child? (PBs are typically read to and by children younger than 8 years old) How short is it? (most PBs run in the 500 words or fewer range) Are the words and concepts relatable to children?
Even if you need to make major adjustments to your short story in order to transform it into a picture book text, you're already ahead of the game....you HAVE a story!
Best wishes, Ilanna!
edited to add: In revising the ms, you might find it doesn't
want to be a picture book. That's okay! Maybe it would be better suited as a chapter book or MG novel. The task of reworking the story is a great exercise!