Hello, the preschool years are when kids learn to enjoy a culture of reading and enjoying books and the treasures they hold. Mem Fox really sums it up in her book. There's plenty of time for phonics once they get to school. My DD (8) is now reading at the top of her class and it's purely because she's motivated to do so and spends time enjoying it! Have said that, at the first school they did Letterland which teaches writing as well as reading (but is a fairly expensive system) but in our second school they did Jollyphonics. Both were equally good but worked best in the classroom context where whole language was also used.
:-)