J.B.
Hi T.,
I had the same problem with my son, and ended up having him repeat Grade K over it- yes he still won't quit being mad about it and he is 13!
I don't know if they still sell it, but I ended up ordering Hooked on Phonics and it was just like magic- he got up to speed quickly and had fun doing it.
The audio CD's were a waste of time (he got very bored) but the workbooks and computer games were a big success. I know you can find it on ebay, and I wish I still had mine because I'd give it to you; but I gave it to my husband's cousin who has the same problem with his daughter.
Good luck!
Jen B