I bought my 4 year old the Word Whammer by Leap Frog and he loves it! He now knows all of his letters and he can spell 3 letter words with the help of the Word Whammer. It sits on my fridge and he plays with it at least once a day.
I also bought my almost 2 year old the Fridge Phonics by Leap Frog and she plays with hers everyday as well. I love the magnets because they are easy for tiny hands to grip and maneouver and they don't get lost under the fridge or cabinets.
The only complaint I have about the toys is that the higher volume setting is way too loud. I always try to keep them on the lower setting.