I know you've gotten a lot of resonses, but as teacher I just hate to not say anything! :) Patience is the trick even if he doesn't seem to be retaining it, he is gaining from what you're doing. There is such a short window of time when children are little to stimulate the neurons in the brain.
Two big things:
*Make sure he is associating the sound with the letter when you are doing it. Like go over and over T... Ttt.. not TUUU (that teaches him T and U together, not just T sound) So T, Tttt, T is for Truck, Triangle, Tilt, Thomas, etc.
*Definitely let him 'manipulate' the shape... like sand on the ground and tracing the letter in it. or shaping play dough into the letter.
Oh, and also work on lower case first. Most letters in sentences and books are lower case. Once kids have that, then they can do upper case.
Good job for teaching him before Kindergarten!!