Letter Factory was created by Leap Frog and is what I used with both of my children. It is a 35 minute DVD where Leap (the main character) travels through 26 letter rooms and learns their sounds (Ks kick and make the /k/ sound, the As are scared and make the /a/ sound).
This DVD was also created by Leap Frog. Once your child has learned the letter sounds, Leap goes on another adventure to learn how to make words. It works on blending words and word families.