Sorry Lily but I really don't understand why you think phonics should mean he can't have access to books that grab his attention [puzzled]
Ok, when ds1 learnt to read, he did a bit of phonics, but mostly it was more of a 'look and say' type method (we're going back a bit now!) - this meant he was able to use his phonics on some words, but also was reading books that he found exciting - because non-phonics words were ok.
I could see this working with ds3 - find a book that he was motivated to read, not worry about the complex words that he needed to read more as sight words, and get the idea that books are fun, books are things he wants to read, and that school books are good.
Whereas he gained an idea that phonics was boring, and the books that use phonics are REALLY dull, and school reading is boring. And because he was bored, he didn't really do much, and of course then got the whole idea that he was rubbish at reading.
That's taken a whole lot of unravelling! In terms of 'ringing loud alarm bells' - the alarm bells it's rung for me are that he is bored. His reading is pretty good now, he's certainly making progress, but still thinks he's rubbish, and passionately hates phonics. The reason it limits books they can access is that this 'pure synthetic phonics' means they are limited to books written with this in mind. And they're just not very interesting, especially for children like ds3.
Earthbound misfit - I think it depends on the child as much as the teacher. Ds2 did really well with phonics, and really enjoyed them, he is very methodical, very fastidious, and likes every detail in place. Ds3 is more 'flitty' and is a dreamer, but is also a thinker, and an explorer - a favourite thing to do is to go on google maps, and explore a new country - e.g. the other day he 'went' to greece, and explored the streets of various towns on street view, discovering it all for himself, piecing it together as he went.
And I think his reading would have worked in the same way, rather than this idea that every 'component' has to be in place so that everything is taught and then constructed, not explored and deduced - I'm sure you'll all shout me down and say 'that's bad reading' but for ds3 it would have been a better way in, and then the phonics could have been filled in.