... well, if you are after educational, spelling/phonics apps that is 
dd1 loves her iPad, and is racing awau with the (few) phonics apps she a;ready has. I have been after somethign like this for ages, as dd1's school is using a lot of photos to get her recreating sentences underneath etc, and best of all, it is FREE!
THe app is: Sight Words by Little Speller; it is developed by Grasshopperapps.
It is a simple app - it has the common sight words, written centre screen, with mini scrabble tiles underneath to drag and drop the letters onto to recreacte the word. Like a million other apps.
BUT
this one is fully customisable 
so, you can re-record the american voice (which uses letter names, not phonics) if you want to - easily done.
you can choose between upper/lower case
you can choose between letting the child randomly put letters into the word/phrase, or have them spell it out left-right only.
there is minimal "wrong" reinforcement (and I think you may be able to turn it off)
you can dleete words you don't want as easily as adding in new ones you do want
you can use your own photos/images, and thus make up a new folder of useful words/phrases (yes, it even lets you use phrases - just writes the sentence under the picture; you can record whatever voice tag/prompt you want, or turn it off)
I have only had a very quick play, so I am sure there is a flaw in it somewhere, but I haven't found it yet!