Well, sight words count as reading, too ... do you sound out every word you read? I certainly don't! Try telling her that you've memorized many words, and that's how you read so quickly, and see what she says.
DS6 was a big sight reader to start and had a *huge* sight word vocabulary. I didn't hear him sound out a word until he was definitely past 4 and he started reading real books around 3yo. So sounding out doesn't necessarily = reading!
We made ds a little "sight word" book when he was starting to read to build his confidence; he loved it. It had words like Mama, Daddy, stop, exit, etc ... and then we added phrases of familiar things, like "orange coat" and "green car". It was great for him to see that he could recognise, and thus read, real words.
