Hi CM,
I'm sure you're already trying not to turn it into an issue with her, as you know it could really damage her self confidence.
Just read to her lots and lots, as WWW advised.
Also you could try reading her school reading books with her first, then repeat them with her reading with you, then seeing if she'll try on her own (obviously not all at the same time!)
Also try her with some books without words so she can just describe the pictures to you instead. This takes the pressure off the reading aspect completely whilst developing her description skills, her story structuring skills and her imagination.
My youngest DS didn't take well to jolly phonics, but learnt his words using the Ladybird 'First 100 Words' flashcards, as he learns whole words more easily.
You can get packs of magenetic words for each school year, so we had those on the fridge and everyone rearranged them to make a different sentence every day. (We ended up with some very strange messages!)
DS2 also loved the foam letters that you can use in the bath.
We played treasure hunts where he would have a set of words, and we would hide an identical set around the house. He had to match up the words and bring them back within a certain amount of time.
Making 'pirate ransom notes' by cutting words out of magazines and newspapers was fun too!
Little and often was/is the key with him.
'Wordshark' also contains some fun literacy games to play on the computer if she prefers to learn that way.
Some children just take to reading later than others, and I'm sure your DD will be just fine.