oneisenough,
I read somewhere that the phonic method is not necessarily the right path to take with the gifted. If you consider that the phonic teaching style is used for the masses and the gifted are hardwired differently you might find that your daughter is just not coded for phonics. We are in the same boat with my DD. She reads words through memorization and can 'read' a lot of story books to us such as 3 little pigs and the little red hen. It is really cute b/c we know she has it memorized but she recites it verbatim. I have tried the sound out game with her and if I ask her what letter makes the 'dddd' sound she will tell us 'D' and maybe the next letter that she hears, but tends to be bored with the game and doesn't want to finish it. We have purchased some I can read books recently and for the most part she is learning through memorization and I think the phonics will have to come at a later date when she gets to a word that is not so easily memorized.
My advice is just be patient b/c if your DD is anything like mine she is probably a perfectionist and telling you she is too tiny is her way of showing her frustration with not just getting it. We just continue to read to her and let her chime in on words we know she knows and using the finger to underline the text as we read. We also try to stay ahead of her memorization game by providing new books she hasn't seen.
