My 2-1/2 year old has picked up a lot from reading various alphabet books – he especially likes Dr Suess’ ABC and Chicka Chicka Boom Boom. And although I’m not usually in to noisy toys, both of my kids picked up a lot from the Leap Frog fridge phonics magnet set.
There are also a LOT of free printables, coloring sheets, etc out there for teaching basic alphabet recognition. I’ve pulled things from all of these sites from time to time when DD was younger, and now revisiting them as I’ve looked for things for my toddler who really wants to have his own “school stuff”:
http://confessionsofahomeschooler.blogspot.com/
http://homeschoolcreations.com/preschoolprintables.html
http://www.1plus1plus1equals1.com/
http://totallytots.blogspot.com/
Have fun!
Jen