IB
Manipulating sounds is a bit of a party trick, IMO. I know that it features heavily on lots of dyslexia sites (and sites about reading), even Diane McGuinness, who I have a great deal of respect for as it was her 1998 book, Why Children Can't Read, which set me off on the whole phonics thing, says that it is a good test of phonological awareness, but I think that it is one of those things which gets repeated and copied without much thought about its validity.
If you think about it, neither spelling nor reading require sound manipulation. Spelling certainly requires that children can discriminate the individual phonemes in a spoken word but it doesn't require them to be taken out and the word without them identified. Nor does it require extra phonemes to be inserted in words. These are difficult tasks which require good phonmemic awareness and a certain amount of mental agility. All that spelling and reading (particularly spelling) require is the ability to discriminate phonemes in sequence. Much easier.
Phoneme manipulation is a very American 'thing', particularly as 'phonological awareness' was held by the NCLB findings to be a prerequisite for acquiring good reading skills. However, the UK SP programmes have demonstrated for years that a child can learn to read with no prior phonological (or phonemic) awareness (PA) as the nature of SP, which works from sound to symbol (or should do), 'This is the sound /s/ and this, 's', is how it it written', means that children are 'taught' each phoneme and develop PA as they are learning to read and spell. There have been many research studies done on training PA and the results indicate that, although PA training is better than no training at all, the very best results (in terms of learning to read) were obtained in studies where PA was done in conjunction with letters.
I am not surprised that your dd is able to do phoneme manipulation now; once children have developed a sensitivity to phonemes they will find manipulation much easier. Even adults find it difficult if they have been taught 'whole word' or 'onset and rime' or 'blends' because these methods do not encourage sensitivity to the smallest units of sound in words. This doesn't necessarily mean that they are poor readers (because many obviously aren't), just that they aren't very aware of phonemes.
I am afraid that my knowledge of improving PA in children with auditory processing difficulties or impaired hearing is more theoretical than practical as I have never yet encountered a child who cannot discriminate phonemes. Which is why I have my doubts about phonological problems being a common cause of 'dyslexia'. I have dealt with quite a few 'dyslexics' over the years. The more severe cases have had real problems with processing speed and short term memory but never with PA. I am not saying that no child has PA problems, just that they are far more rare than the dyslexia literature would have us believe.
I say my knowledge is theoretical but it is informed by reading about how children with hearing impairments can learn to read and lip read (which requires PA, if you think about it) by 'seeing' and feeling' phonemes and reinforced by the fact that one of the leading UK experts on APD says that children with APD need to be trained in phoneme discrimination..
Of course, the difference between some phonemes, such as t/d and f/v are more difficult, if not impossible for these children to discriminate as they are very similar in 'look' and articulation.
One child I worked with, who had speech production problems, had very impressive PA because he had been taught with the LIPs programme which I mentioned earlier.
Interestingly, one of the early (early 20th century) initial reading programmes, which was very much a forerunner of SP, spent a lot of time on teaching children the phsyical aspects of phoneme articulation, using mirrors and awareness of mouth and tongue positions and airflow during articulation.
I was a bit amused by the child who can't discriminate between 'fanks' and 'thanks'. I suspect that half the population of England can't do that! I spend a lot of time telling children to stick their tongues out to say 'th'! Most of them think (or should it be 'fink'?) that 'thought' and 'fought' are homophones... it might be getting to the point at which to give up the fight and just teach 'th' as a way to represent the /f/ sound. 