I agree with Ben. This seems like it could quickly turn into another handheld game for the kids.
Leapfrog came out the year my son was 2 and we decided not to purchase it because of the "gaming" quality of it. My son was reading The Very Hungry Caterpillar by the time he was 3 and without the help of video games and moving pictures.
I firmly believe that if our kids only learn to read using this type of device, they will NEVER learn how to struggle AND succeed. They need to struggle (ie: sounding out the words) without having that "cheat" button available to "read" the word to them the first time they struggle to sound it out.
And yes, now that the boys are older (11 & 15) we have all the gaming systems...so they aren't "deprived", LOL!