Jeani..my son came to me at age 3 and asked to learn to read. He knew his letters and their sounds already. I sat down one day and explained how to put CVC words together. He caught on right away, so I made lists of CVC words and would check them off if he could sound them out. I also purchased a few sets of the BOB books and he read those to me. I didn't start a phonics program or anything, just continued reading aloud to him and let him read his little books.
Imagine my surprise when about 6 months later, at the grocery store, he says to me, "momma, that sign says 'please do not block this exit!'"
He was not quite 4. And he hasn't stopped yet. He just turned 7, is in first grade, and now reads at a 7th grade level. I've never done another thing besides write down those CVC words when he was 3 and then read read read.
If your child (ren) is going to be an early reader, he'll read with or without your instruction. I can't explain it. To this day, I have no idea how Ben learned to read. It just clicked with him. That's usually how it happens with very early readers from my experience talking to other moms.
Personally, I think 3 and 2 are a little young to begin "formal" school. But that doesn't mean you can't read to them, point things out, answer questions, etc. Mostly just have fun with them. They are still babies. Trust me, they'll grow up soon enough and you have lots of time to do "formal" schooling.
If you'd like a recommendation for a fun literature-based program for that age, I highly recommend Before Five in a Row.
http://www.fiarhq.com