I enjoyed making our own flashcards with the kids by cutting out pictures and letters from magazines, gluing them to 3 by 5's and then laminating them with clear shelf paper. The kids would help and it made learning the phonics lessons much easier. www.starfall.com is a wonderful site to help with early reading skills too.
When it comes to reading though, there are 2 sides to this coin. You don't have a choice but to pick easy readers for her to read to you. But it doesn't sound like she's ready for that. What you read to her is designed to unlock the world to her. You get her excited by reading cool stories to her that she's not ready for reading herself. But tell her how when we keep doing our phonics lessons together, she'll be able to read this to you one day soon. My husband bought the entire Wizard of Oz series and we have hundreds of reading story collections and reading textbooks I've bought at thrift stores and nicer sets we've bought. Just make it fun. I love ALL books. My husband is really into older books. My daughter even enjoys looking at encyclopedias....she's 10 though :)