Well sitting chanting things out from an OHP sounds very different from how DS was taught phonics, they spent time colouring in the things which started with "c" in the picture, singing songs about "c" words, drawing things, then later underlining words or letters, or finding them in word searches. All lots of fun.
I think if I was a 5 year old boy having to be taken out to sit in the corridor and not doing the same work as the rest of the class, I'd have very mixed feelings about it, however much fun the book was.
Because of us moving, DS did reception in a school in England then started P1 in Scotland. I thought it was more important for him to be with his proper age-group, and not being pressured as reception doesn't cover as much as P1 does, so we didn't get him put up into P2.
But he could already read, so when the new P1s were starting at the beginning of phonics he did his reading with the P2s. In his case, it wasn't a horrible isolating experience, but that was largely because he was in a composite P1/2/3 class, where they moved between different groups for different subjects. If he'd been in a purely P1 class, I think it could have been much more difficult for him, and I don't think the enjoyment he got out of books would have been that much of a positive.