We have an adorable video of DS at 2.5 "reading" the little engine that could to his stuffed animals. No one believed he was reading, it seemed memorized, but by that point he was whole word reading. We were also playing with star fall at the time. So he memorized chunks of words and started seeing them elsewhere. We went into target right before valentines day and he pointed up and said "ox, mommy" there were hearts and xo xo hanging from the ceiling!!! Exit, open and closed were also early words. Exit because of the highway signs. He was reading, really reading and figuring out words by 3.10, but he was never a sound outer. It lead to hilarious exchanges trying to figure out what word he is saying that he has only read. In our experience the decoding and phonics issue was never relevant. He just did. But he has a phenomenal memory so we wonder if it allowed him to skip that step.
DeHe