I second the recommendation for children's picture encyclopedias. I also recommend games and puzzles. Besides beginning board games, DS2 has enjoyed games like Clever Castle, 3D wire puzzles, jigsaw puzzles, 3D models, etc.
Your son doesn't need to sound every word out every time. It's okay for him to learn to sight read words that he knows already. I'd read to him and talk to him, as polarbear suggests. Find something he enjoys. Both of my sons have greatly enjoyed comic books from a young age.
Math manipulatives such as Cuisenaire rods may be fun for him. Building toys such as Legos, Magblocks and Magtiles, or even cut lengths of PVC piping might engage him.
Software games may be fun for him, and help him develop foundational mouse and keyboard skills. I remember DS7 expanding his reading early on by playing games such as Zoo Tycoon. Starfall and similar sites are fun for my two-year-old.
