I will probably have to avoid the i spy game with him. one of his obsessions is listing as many words as possible with the same letter. If i did this game he would never get past the first sound before he had listed 30 things beginning with m! he is getting better but only by sounding out the whole word.
Do not forget teach reading a child is not a weekend job. Of course you need to play phonics game with him a lot of time before he gets the idea. I played this game (with the first sound) with my son for months when he was 3. If he starts to list 30 things beginning with m (what is very good start, that is what we want him to recognize the letter in the beginning of the word), you can help him with describing the things. Like: this thing is on the table (so he knows where to look at) and it is red and has spots (so he knows how it looks like) and we drink tea from it (so he knows what is the work for that thing). Patient makes teaching easier. Remember how much time they need to learn walking, speaking, eating alone etc...
I would not recommend picture reading, because if they won't learn the phonics correctly their spelling won't be as good and they would struggle to write down a new word after hearing it. Of course there are a couple of words in English that you need to memorize by picture reading (look the word and learn it).
Also they do need to see the similarity in word that has similar beginning, but different in ending (e.g.: map, mat) or different in the middle (cat, cut) or with the same ending but different in the beginning (cat, hat). They need to recognize it by themselves, because what they can find out themselves it will stay with them forever and they can apply that knowledge more easily. Things that children can learn by themselves it is a lot stronger knowledge than what you teach them. Of course get the idea by themselves it might come a bit later than if you tell the answers for them. How you can help? Practice, practice, practice and clever questions that help them think what is going on. It is the same with math. I would not teach a child that 2+3=5. Instead of I would give him 3 apples and give 2 apples to myself and ask the child how many apples we have got. So he or she will understand the concept instead of just memorizing that 2+3 equals 5.
I would not recommend to go any further until he is absolutely ok with these (no 4,5,6 etc... letter words). Because if he learnt this he can use it with harder words as well.
And one very important suggestion and I know it sounds very criticizing; I did not mean to criticize you. Teaching the children to love reading and books is far more important in your son age than teaching proper reading. Do you teach him how the books look like (cover, title etc.), that every story has a beginning, middle and end. Can he tell back the story with his own words that you read to him? Can he tell a story if you put some pictures in front of him from the beginning to the end? That is the start for reading. A child who knows all of this is far more ahead than who knows the phonics. Because they need to understand what they reading (and you can teach this by letting them tell the story back to you, or let them tell a story what they can see on the picture) and need to be able to store these information in their brain and pull the information out in a later time when they need it. This is the start before you even mention phonics to them.
Until he enjoys no problem at all, but the first time when he is bored or even saying "I hate this" you should stop and wait, because he won't like reading in his whole life. Probably there is a reason why teachers start teach reading in Reception and not in nursery? If he won't like reading, even what he reads in the future he will forget it and won't use books for learning (like history books, biology books etc.).