We're giving Progressive Phonics a try over here. The thing I like about it is that Nugget is reading words right off the bat -- a nice way to contradict her insistence that she can't read. I also like that the words she can read are mixed into a story that I read, so the stories are more interesting than your basic phonics starter. And, of course, having the main character be an animal is a big plus for my animal-lover. :)
Although she's sounding out the words in the first 2 books, she's definitely got a developmental leap or two to go before she's really reading. In the meantime, I think this is a nice, low-key way to keep the letter sounds fresh for her and keep her from getting stuck in the "I can't" rut.