I've just spent two sets of 20 minutes trying to teach her 'they' and 'away' and she just doesn't have the faintest idea.
This is not normal for a 5 year old. I think you can safely assume she's dyslexic. (Depending on how you want to define dyslexia)
This is exactly the behaviour my DD displayed at 5.
If you've been following my posts you know I don't believe in testing for dyslexia - I just believe in getting on and curing it.
I believe dyslexia is caused by underlying problems that can be cured. And the sooner you get on with it, the sooner you'll cure them.
But - I also believe in starting off with something like Bear Necessities first. That is one of the best phonics programs out there. If it works, then great - she doesn't have dyslexia. If it doesn't work, then you have to start doing an awful lot of other stuff....
But you'll start doing the other stuff knowing that more or better teaching isn't the solution.
An eye test is a good suggestion. Thing is it's so hard to get a good one done. First of all I'd just ask her if her eyes hurt, if the words move, if the words are blurry etc.
Coloured overlays only help a tiny fraction of people with reading difficulties. And they're the ones for whom the words appear to move etc.
Spend the next few months trying to teach her to read, using something like Bear Necessities. Then if it doesn't help, you need to start trying out all the alternative therapies till you find the one that helps.
I'm fairly sure I know exactly what therapy you should start with - but I need to test it for a few more months. So get back to me after you've spent a few more months teaching her to read, and you're ready to try something else.