Hi, I have tried the Doman / lessonettes / Titzer method for reading. My son was reading words he liked, mostly food, before 1. The problem with the method, if you don't computerize, is that it takes too much time to prepare the materials.
I am starting a Spanish preschool for my child and the other mothers who teach with lessonettes. It will meet 2 times a week and the teacher will make the materials.
As to recognizing words as not reading, well, I think I like the definition of reading in Tony's Buzans book, something like Left Brain, Right Brain ...
As to phonics. When a large vocabulary has been acquired, kids absorb natural phonics. For example, they know 20-40 words with the letter "b". When they come across a new word with "b", they know the sound.
As to forced phonics, that is the method used in most schools and it has problems, including sublingualization (hearing your voice in your head as you read), slower reading usually at the speed speech, and lower comprehension.
Ideally, I think the best method is lessonettes till a child has a fairly large vocabulary, then reinforce the natural phonics. Forced phonics first is much to didactic and "nonjoyous" for a kid. You want them to have fun! Additionally, phonics is not ideal for the English language. I would use forced phonics for Spanish, however, because it has much less phonems and is a much more consistent language. English has to many contradictions for forced phonics.
As to the Spanish cards you accidentally acquired, I am interested in them if you don't want them. Our preschool is non-profit and takes donations .