If you are going to teach your child letters teach them as phonetic sounds (a,b,c) not names (ie. ai, bee, see) Knowing the letter names does not help a child read and some children get confused between letter names and letter sounds. Little and often is best and also its important to back off if he isn't in the mood.
Jolly phonics do really nice finger phonics books and a DVD which your child might like, although they may be a bit young. Jolly phonics produces a very good handbook on how to teach a child to read.
I taught my son to read using Jolly phonics at the age four years old, because I disagree with the way that reading is taught in the majority of primary schools. At the time he was very moviated and learnt to blend and segment words very quickly. See these websites on methods of teaching reading.
www.dyslexics.org.uk
www.rrf.org.uk/
I chose to teach my son to read because I did not want to leave it to chance. The percentage of children who leave primary school with inadequate reading skills is truely horrifying.
Honestly it not a sign of intelligence knowing letter sounds or letter names at two years old. Its a sign of being hot housed. Children who learn to read later often over take hot housed children.
What is more challenging is teaching a child to blend. Also there is more to reading than just barking at print. Just because a four year old can decode seven year old books does not mean that they actually understand them!
Learning good social skills, manners, knowledge about the word is important at two years old. For children to comprehend what they read they have to have a range of life experiences. Children also need to build lots of muscle running about in the park and climbing.