My DD read early (or averagely according to this thread...she was 4.5) and we thought we had a genius in the family (oh the arrogance of us!) and she'd memorised loads of books when she was 2-3 so we really thought we'd hit the intellectual paydirt.
Of course, it was ego-stroking, nothing better to think about, nonsense! She's now 7yo and, thanks to common sense on her part and, I like to believe, a lack of pressure on our parts, she is now a lovely, bright, but definitely not gifted youngster. She usually does well in her tests and reports, but I don't really think she's any brighter than most 7yos.
I explained to her that she is a smart girl. Yes she could read before some of the other children, but that doesn't make her better than them and she mustn't rub other people's noses in it.
I explained she couldn't necessarily run as fast as some of them, or paint as well as some of them. That wasn't because she was rubbish and they were great, it was because she spent more time doing the things she was good at.
I told her she had as much chance of being good at painting, running, whatever she wanted, but some things she would have to work at and try really hard. That's what the rest of the class would be doing to catch up with her reading level. And sure enough that's what happened.
My dd was lucky that reading came easily to her and writing too, but that doesn't mean she'll automatically be o.k. for the rest of her school life. School means having to work hard sometimes at things you're not naturally good at and that's the most important thing she can learn.
Like good looks, inherent quickness with a subject can fade away...you have to keep working at something to stay good at it. I read newspapers when I was 5 and stuff just came too easy to me in the early days at school. I can still pass exams without much effort, but it's no good if it makes you lazy...which it does. Like with Aesops Fable, slow and steady really can win the race.
I do believe, however, that kids are held back at school by a lack of reading skills. I help out some Y6 kids who've got reading issues and they are so bright and clever, but they worry more about school and are much less likely to enjoy the whole school experience. That's not mentioning the practical difficulties of facing time restricted exams and having to write what you mean on test papers.
IMO if you think your child is struggling with reading and you are worried, push the school for whatever extra help you can get and start looking at different literacy books.
I've just started on The Reading Remedy which is a really good book that addresses how to turn your child into a reader. It's Amercian, so it links to an American phonics reading system, but it still has some very sensible things to say about slow readers and their inability to decipher text. Once a child reaches y5/6 it is so much harder to turn them around with reading and they are certainly more likely to fail academically, which can be sould destroying for everyone involved.