Sight words are not bad. My son is severely dyslexic and although his tutor spends most of the time teaching him the sound symbol relationship, word patterns and otherwise how to break the code, she also spends time using the Dolch word and phrase lists.

Sight words are the most frequent words that readers come across and it is very important to be able to recognize them instantly and accuratly. Many of the sight words are "rule breakers" or don't play fair and do not follow the common word patterns. Therefore, they cannot be sounded out and must be learned.

That said, most research support the use of phonetic reading programs. At least 80% of the English language follows predictable rules. It is far easier to learn the rules, than to sight read each individual word in the English language.

The National reading panel has conducted signifcant research and published many papers about best practices for reading instruction. Here is a good link to get you started: http://www.nationalreadingpanel.org/Publications/researchread.htm

In addition, Reading Rockets is a great website for pre and beginning readers: http://www.readingrockets.org/

The best thing you can do with a young child is to help develop phomemic awareness - This is the foundation for future reading skills including phonics. http://www.readingrockets.org/atoz/phonemic_awareness
Make sure you are enjoying poetry, nursery rhymes and reading to your child daily. When you are out and about, begin to point out logos, signs and numbers. This helps to develop the abstract concept that print has meaning. To the extent that your child enjoys letter play and word play, have fun with it. WRite letters in trays filled with sand, with a paint brush and water on the side walk, with shaving cream in the bath tub. Above all, make it fun and shut down the activity at the first sign of frustration.