My mother has been a Title I reading teacher for nearly 30 years and HATES phonics-teaching. She finds whole language works much better for children, esp. considering all the exceptions to the rules in our language.
DS1 never learned phonics, and the only time in his life that it has been an issue was in public school kindergarten. The teacher gave him a pre-test, asking him what each of the vowels says. Well, even then, he could spell at a 4th grade level, and bombed the test by thinking of words with different vowel sounds. (For example, he told me he was thinking of the word "through" and trying to figure out what the o and u say!)
Later that day, I was shocked to discover that the class had been watching Letter Factory, which is what our 1 year old was using at home. I led DS1 back to the Baby Tad magnets on our refrigerator and reminded him of "A says "ay", a says 'ahh', every letter makes a sound..." He giggled, then went off to retake the test the next day and aced it. I found the whole exercise ridiculous.
DS2 is starting to learn to read, and I do find us talking a little about phonics since we sometimes play with ABC reading eggs. He seems to pick up the words he knows from whole language, too, though.