I wouldn't worry about the delay in reading, but you should be teaching her the basics before she starts kindergarten.

Does she know her alphabet visually? Be careful, because a lot of children mix up 'n' and 'u', 'M' and 'W', 'I' and 'l'. Once she knows her alphabet, help her identify the first letter in words (I think they call this the onset) since it will help to establish a link between oral and written language.

After that, go with whatever works. Since she sounds like the creative sort I would suggest something like nursery rhymes. They have all sorts of made up and archaic words that make sounding out words fun.

An option for comprehension is to read read picture books and ask simple questions that relate what you read to the picture. Things like: "Can you show me Jack?" and "Why does Jack have a bucket on his head?"

Settling her into reading may involve letting her look at the pictures, and letting her tell you her own version of the story. Then you can read her the actual story and ask her about the differences between her story and the story you read, which she likes better. If she's uncomfortable with telling her own version of the story, look for oddities in the illustrations and ask her what she thinks is happening.

Most of all, try to keep it fun. I have yet to see a child who thinks that activity books are fun (a lot of them are rote exercises and some of them are just plain useless). The early stages of reading tends to involve a lot of one-to-one interaction simply because most people learn reading by relating written language to oral language.