Thanks for all the great suggestions ladies.....My goal for today is look them all up.....and make a new plan.
Have you looked at Explode the Code online? I used the books with my oldest and plan to use the online program this year with my second son. The books look dull, but they work. The online program looks fun.
We are using MCP Phonics, Color Phonics and Starfall. My kids love Starfall and I use it as a reward for getting the rest of their work finished without complaining. Oh BTW my aunt who is a public school teacher suggested Starfall to us. They use it in her school.