Thanks for your replies. They are helpful. I started as hypatia suggested by pointing out when there are words that are spelled the same in the two languages like "bus". I try to just say quickly "...and in English you say bus." Too much talking and I loose him.
Lois1, that's neat that our son's are the same age and similarly learning Spanish and English.
Ian is starting to be pretty verbal. He repeats everything (a million times if he likes it) and starting to make simple sentences. To my surprise he seems to understand the difference between English and Spanish. He used to mix the languages a lot. Now he usually answers in the right language although not always. I never really told him that this is Spanish and this is English as I was always just so happy to hear him say anything.
I don't think being bilingual would slow him down in learning whole words. But, learning to read phonetically I would think would be harder in two languages. I know some kids can intuit phonics but I think those are the kids who pick up whole words very quickly and therefor have a lot of sight words to begin to recognize the pattern. With two languages the pattern would be less recognizable and since my son doesn't seem to pick up the words very quickly I figured he will need to be taught phonics. But, I think as you do; the second language should be fairly easy once they have the first.
My son never indicated that he recognized any of the words from LR either and I am pretty sure it is because he really doesn't recognize them. He doesn't like testing but will volunteer that he knows something if he does. The only words he has recognized are words that we have played games with. I am constantly making toys and books for him out of flash cards as I think he learns better from the interaction and he doesn't like actual flash cards. To be fair it is harder to know what he knows from LR as he has less opportunities to volunteer what he knows.
We are making progress. He now knows all the vowels in Spanish and I don't know how many letters. He knows some syllable combinations: ba, be, bi, bo, bu and sa, se, si, so, su. I have them taped on our two bathroom mirrors and every time we go in the bathroom we drive cars and things over the syllables. Now I am going to try to teach him words like beso, bus, base (as in primera base). I really don't know what I am doing but it seems logical.
If I understood my MIL right that is how they teach reading in Spanish.