On the topic of phonemic awareness, how about moving specifically toward recognizing beginning sounds of words? Just around the house and in everyday conversation and than slowly add activities to your 'reading' lesson.
On Themeasuredmom.com she has some fun printables where you match letters to pictures. (ie. picture of a dog, match the letter d). Another games she calls blackout bingo is just a sheet of pictures and when you shout out a letter and/or sound you find the pictures that match.
http://www.themeasuredmom.com/beginning-sounds-activities/.
After watching Leapfrog Letter Factory with my son he knew all his sounds and we just moved on to recognizing beginning sounds. "Oh, look a garbage can , guh,guh,guh, what letter is that? Than after that is too easy don't even repeat the beginning sound, just repeat the word. "Garbage, garbage,garbage, hmmm what letter sound is that start with?" Very important skill when they want to start writing words by themselves while journaling/colouring.
I have been working with my son on blending since 3 1/2 and it is finally just clicking at 4. I just keep the activities going and reading BOB books and modelling the blending with him.