How long are these books that you are using to read with her?
My son was much the same and finally learned in the first few months of kindergarten. In addition to what he was doing in school (basically, letter/sound recognition), we did Stepping Stones Together at home. (Disclosure: I received a free trial in a blog contest win and did write about my experience over several posts. It was not compensated, but just letting you know that I had gotten it free from a contest win.)
The take away was that I was trying to teach him in a way he wasn't going to learn. These "books" are interest based and very short, but with a lot of word repetition. You print it -- it's a little booklet. They can color them if they want.
http://www.steppingstonestogether.com/
