My 5 year old loves our Montessori movable alphabet.
Here she has a pic. of a 3 letter phonetic word such as cat, hat, mop ect... she is placing the letter w/ initial sound above the picture, and the letter w/ the ending sound below.
Right now we are spelling the entire 3 letter phonetic words matched to the pictures. Sometimes she just likes to think up a word instead, and sound it out spelling it phonetically, whether it's the correct spelling or not doesn't matter as long as it's phonetic. Also note that "c" and "k" make the same phonetic sound and at this point are used interchangeably.
Sometimes if boredom sets in we jazz things up a bit by adding a picture cube that we can enclose our words in and she tosses it up in the air and which ever pic. is on top that's the word she spells. Then she tosses it around again for the next word, until she's all out.
We've started out with just simple subjects and predicates. Better known as the noun and verb I suppose. My son hated to just diagram his Eng. book sentences so I dug out the words we had used for the Montessori farm, and they worked perfect.
I even found a little fishing tackle box to fit them in nice and neat. :) I tell my son how many sentences he should write on his paper, and he builds them, diagrams them, and then 
writes them on his paper. :) It made all the difference just being able to make up his own sentences.
