Val-
My DS is nearly 6 and started reading about a year and a half ago, but very slowly. He was "ready" to read since he was 2- knew all his letter sounds, blends etc but wouldn't put them together. He has always been a phonetic reader and had very few sight words until a few months ago. It drove me nuts because it would take forever to read one sentence.
CAMom -
This is very reassuring. My DS is 4y10m. He has just recently moved beyond "knowing the components for years but not putting them together". He has not gotten to sentences yet*, but he is definitely reading individual words. (finally! and sometimes without context cues!) It is so exciting for him and me and DH when he reads a word for the first time. That previous phase was very frustrating (for me).
As you guys describe your 6 and 7 year olds I can see my ds is headed that way.
EW
*by sentences, I mean regular length sentences not 3 or 4 word "easy reader" sentences