If your son knows the phonograms and is sounding out words, then he is able to read readers. What he lacks is fluency. That will come with lots and lots of reading - or saying the words when blended in Reading Bear. One thing I did with my oldest is have him find words on print. So if the word is cat - have him hunt for the word in a book or newspaper or anything else you can find. This is basically memorizing what the word looks like. That is what you do when you read. You don't sound out every word, you brain just knows it. We sound out words we've never seen before or don't have locked away in our brains. The other thing you can do is teach spelling at the same time. This is very helpful. I use phonogram tiles which I've attached. So if you are working on cat - then have him make the words: sat,mat, fat, rat, bat, hat, pat, vat. Let him discover how easy this is. Similarily, if working on cat you can then work on: cab, cad, cam, can, cap,
As far as your youngest who is just a few months younger than my son, I can tell you what we are doing. We are using LR and we did a little YBCR, we use Reading Bear and Starfall, and whatever he feels like. Including phonogram tiles. We showed the 1st five Reading Bear slides until my son knew then cold. Sometimes he'd get bored so we'd pick the the rest of the presentation later in the day. Part of the issue is not boredom, the have to process the information as well. So they have to turn their head away to keep from getting more input. When I have a headache or am working on a difficult mental activity, I shut out input. I lock myself in a quiet room, I tell my family not to disturb me. They are no different. In the beginning, my son would simply repeat the words after the he was given the work in the presentation. Then he could sound them out quickly. Sometimes now, the words don't have to be sounded out. He just intuits the phonics. He is not reading books yet. Not because I am keeping them from him, he would rather be read to.
You will see below the post is a link to the phonogram tiles. Suggestion: when I did these the first time I laminated them and attached a small magnet.In the hands of a two year old, they won't last long. The second time I made them I printed them on cardstock, used spray adhesive to attach the whole thing to a magnet sheet, then I laminated the top and cut. They are much more sturdy.
http://forum.brillkids.com/downloads/?sa=view;id=9146