My kids reading has really been helped by an online phonics lesson that involves the Looney Tunes characters. It gives them several areas with multiples choices where a robot says the letter sound or word and they have to pick it. They read sentences along with the robot, and as we are finding out as we go, they have to unscramble words to make complete sentences. It also incorporates the computer keyboard into the lesson, so they have become very proficient at using the keyboard.
I discovered this program on a living social deal, so when I saw another deal the other day by the same company, ClickN Kids, I grabbed it. It is for spelling and more phonics. It is a lifetime subscription for $17! While it won't have the Looney Tunes characters in it, that is OK. We are 53 lessons into the Looney Tunes one and the kids have asked me to cut out the cartoon content in the middle and only want to do the lessons. They would have never asked me that at the beginning, but their learning style is changing and they want the lessons more than the cartoons. (That program allows you to control the amount of cartoony-stuff in between the lessons.)
It also gives you a report at the end of the lesson to track progress and if 4 or more errors are made it recommends that the lesson is repeated. I have been printing those reports and saving them for the homeschool portfolio.
If you are interested in checking out the spelling and phonics programs, you can go here. I believe the deal is valid for TWO more days.