Whole Language is an approach to spelling that encourages a lot of reading aloud to your child (a good thing!)—but it also encourages kids to read by sight rather than by sounding out words.
In reality, there are very few words that don't follow any phonics rules and that must be learned by sight. All About Spelling teaches these words (they are called "rule breakers" and they get put in jail, which my students love!), but the majority of words actually do follow the rules and can be sounded out.
There are a couple of problems with the sight-word only method. First, it encourages kids to guess. Words like house and horse look almost identical—they begin with ho and end with se, have the same shape if you draw an outline around the word, and are the same length—but as you know, they are very different words. A child who only knows how to read by sight will confuse words like these.
Second, sight-reading doesn't give the child strategies for reading unknown words; he has to hear the word, look it up, or ask someone what the word is. These students rely on pictures and context clues; they have to take a mental picture of that word and store it, and—to become fluent in reading—they have to do that with thousands of words. With phonics, on the other hand, students need only learn the basic phonograms and their corresponding sounds, which will give them a strategy for figuring out new words. And once a student has decoded a word, he can use context as another strategy to confirm what he has read.
Understanding the phonograms really demystifies reading and spelling. English letters and letter combinations (phonemes or phonograms) stand for sounds, and kids appreciate being let into this "secret" or "code" of how our written language works.
Another aspect of Whole Language is that it encourages students to use "invented" spelling as they write. That's not necessarily a bad strategy for helping a young writer express herself, but without also teaching the skills of how to spell, the student is left on her own to figure out spelling—or to continue struggling.
An alternative to invented spelling is to allow young writers to write without being required to edit everything. For items that require editing, have students look at their work the next day and see if they can correct any words or spelling patterns that they have already learned. This strategy keeps students from getting overly frustrated and from giving up on words they don't know how to spell.
All About Spelling includes dictation exercises that give students the opportunity to practice writing in sentences. The dictation reviews previous and current spelling patterns, and ensures that students don't just memorize a list of words, but that they retain the patterns long-term. Dictation is a great exercise for helping kids break words down into sounds (segmenting) and syllables for writing, without actually having to come up with original writing themselves. Try emphasizing spelling instruction in the context of dictation and, when it comes to their own writing, only hold students accountable for words and patterns already learned.