runnerbean, I've got two dds who sound similar to yours - by the age of 4 dd1 was reading Just So Stories; by the age of 7.5 dd2 is still not capable of reading them!
If letterland is confusing her, then she is not ready for it. Agree with the others, just concentrate on getting her to enjoy books as sources of entertainment/fun. I used to work in a nursery and here are some things I did with my "charges":
Get loads of the big picture books from the library - encourage her to talk about what is happening in the pictures, ask her to predict what might happen next, show her the title, name of the author, name of the illustrator, the blurb on the back, explain what all these are. All these are important peripheral skills in reading which she will enjoy learning without realising she is learning.
If she enjoys painting/colouring/sticking then you can use these sessions to cement her letter recognition - eg draw a big letter "a" for her to colour/paint/stick glitter on etc.
Laminate cards with each letter of the alphabet on them twice over(playing card size, except square), ie 52 cards altogher, pick out five pairs at a time and play pelmanism (put them all face down, get her to pick matching pairs, memory game) - helps with letter recognition. Use bigger laminated cards with letters on, use three or four at a time, put them on the floor and give her some bean bags - "Can you throw a beanbag onto the t/ the c/ the l?" - more help with letter recognition!
If I remember any more I will let you know!