I second the Richard Scarry books. DS loved it before he was two - I think The Best Nursery Rhymes ever was a hit, as were the others. At the time, I wasn't thinking of reading, but he surprised us by reading out loud page after page. It definitely was whole word recognition. Anyway, we did the Dr Seuss Books much later at 5. Those definitely helped in phonics recognition. We had no other readers as DS didn't like them. Books by Julia Donaldson were also wildly popular here, as were Pamela Allen books.

http://www.juliadonaldson.co.uk/picturebooks.htm

http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Dus-stripbooks-tree&field-keywords=pamela+allen&x=0&y=0&ih=9_2_1_0_1_0_1_0_0_1.88_119&fsc=-1