I'm not a reading specialist, but I do have four early readers. My understanding is that the period between letter and or sound recognition and actual decoding can vary greatly. I've seen some differences in how fast my own children have progressed, with some rapidly from one stage to another, while others have had a longer "ramp".
I don't think you need to worry about your child's abilities, but you can do a few things to encourage reading. Try starfall on the computer, simple books that you write and read together, and make sure that your child sees you reading for pleasure. I have a short article that may be helpful:
http://www.bellaonline.com/articles/art25155.asphth!
