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phonix cubes fit with your original idea they look like this

Both of the companies below sell foam dice with plastic pockets. You can insert sound cards in the pockets.

www.superstickers.com/i/g10100/small-pocket-dice
www.languagestickersonline.co.uk/acatalog/Pocket_Dice.html

Pinterest is very good for phonics game ideas.
I also like the measured mom's site.
www.themeasuredmom.com/10-diy-reading-games-for-kids/

Alphablocks is an amazing phonics programme. Youtube has all the episodes, from which children learn their letter sounds and how to blend them to make words. Then there is a set of magazines and games you can buy to follow on. We love it!

Free website:

bigbrownbear.co.uk/index.htm

There may be something here, but you have to purchase the original software:

www.dialsolutions.com/myworld/

My kids learned their first 26 phonemes with the foam letters you put in the bath. Great for word building too.

Wow some really creative ideas here thank you. Yes, the blocks idea was something like a jigsaw which you would build across rather than up.

I'm off to check out all those links - thank you!