She also can spell just fine if I sound out each letter or blend, but she can’t identify each sound from the whole word.
OK. This means that she is having trouble segmenting (separating) sounds. If you say "cat" she should be able to segment the three phonemes, separated by a second. /k/.../a/.../t/. Can she do that? How about "ship"... can she segment that into /sh/.../i/.../p/? How about "witch"? Can she segment that into /w/.../i/.../ch/?
What about words with four phonemes? "Slap". Can she segment that into /s/.../l/... /a/.../p/...?
How about "mist", "drop" and "black"?
Next, try words with 5 phonemes: "spend", "crust" and so on. It is vitally important that the child can segment each phoneme... she shouldn't say that "st" is one sound. You need to separate each sound from the next one, because that is how you know what letter to write down.
You can find a simple test of phonemic segmentation in the book I mentioned above, Reading Reflex.
If your child is having trouble with phonemic segmentation, there are many simple activities you can do to help her. It sounds like she already knows her basic code -- the (most common) sounds that match each phoneme -- so that's a great help.
If you need more practice on blending and segmenting and join the yahoo group I mentioned above, look in "files" under "Level A/Blending and Segmenting Work" for a lot of extra practice.
http://health.dir.groups.yahoo.com/group/abecedarian/files/
