Yeah, I'd suggest starting with form processing and storing the form data to mysql. That will help you get started understanding the language with a good practical application, but really, any real world practical application will do. As far as books go, I'd really just suggest downloading the Extended HTML Help file from PHP.net. The extended version is chm format (windows help file) and includes all of the user contributions, which has very good examples.
You can download it here:
http://www.php.net/download-docs.php
PHP5 Power Programming is also a pretty good book and is available for download. I'm not sure how legal this is, or where the screw up is, but if you Google it, the pdf link comes up as a download available from the publisher's site. My guess is they goofed, so get it now.