In the method I use to teach my children to read, I do not use the letter names, I hold up the card that shows the letter and I tell the sounds. For example I hold up the letter a, and I say the sounds it makes... short A (apple)long A (Bake) and "ah" (always). Names of letters came later, when it was time to spell, and you tell the letter name along with the sound and the child spells the word for you.I've taught all my kids letter recongnition / reading / spelling / writing with this method.It covers all the senses at the same time and really brings it home. The program is called Spell to Write and Read by Wanda Sanseri.
I have found that children will learn very easily when the brain is mature enough for the concept, but if it is not, you and your student will be highly fustrated! If the child of that age (2) seems preoccupied and not willing to settle down and listen, then she is too young for the concept. You will spend many more hours trying to teach it now, than waiting a year or two and trying to introduce it then.
I didn't try to teach actual reading/recognition of letter sounds until my children were 5. If they are interested and they ask, for example writing their name, by all means it should be taught, because interest shows readiness.
With my boy, I started letter "sound" recognition at 5 and struggled and struggled to get him to do it, but then ended up waiting another 6 months and tried it again. That 6 months made all the difference and what was a stuggle before was quickly and easily absorbed and he was understanding and reading in no time. I found the same to be true of my young daughter with math concepts.
Two years old is an age of exploration. She is learning a GREAT DEAL as she plays , manipulates things, and interacts with her world. If you find something she is interested in great, but if not don't worry. Time will bring the maturity/interest needed for the concepts you want to teach.