I used this program with one of my dc and loved it! I still use the terminology that is used in the book for my youngest son because it makes the most sense to me.
I believe the website I had purchased some supplemental workbooks from is no longer available but it was something like readamerica dot something. I have the book and can look it up for you to see if their products are still available or maybe they have some at Rainbow Resource.
I thought the stories were fine, they definitely got the job done and there are plenty of other practice readers like Pathway Readers, which are wonderful.
This program does teach sounds but it is described differently. Instead of saying that a letter makes a sound (which they don’t), they say that people makes sounds (which they do). The sound picture (the letter) represents the sound/s we make.
I don’t think that anything is assumed, they give directions on what you could be doing with a young child and using magnetic letters is one of them. If my memory serves me right, they offer suggestions for pre-K students, nothing formal, but some activities to prepare them.
I’m sure I answered only a part of your questions and completely out of order, sorry. But, I hope this helps.
BTW, I did cut up all of the sound pictures and they are in labeled envelopes if you’d like them. If you leave your email address, then I can get your mailing address and send them to you.