I don't *think* there were many children in my son's class who could already read before they started school. Regardless of whether or not they could read, all children went through the 'letter a week' thing, although I don't know how much actual time in class was spent learning the letter of the week (I never actually saw the teacher 'teaching' this letter). Our prep teacher (who was very talented at teaching children to read) taught all the reading component of the literacy block in small differentiated groups and so children who could already read (or who picked it up quickly) could work at their own pace. I imagine this is how it would work at your son's school. It wasn't perfect - many times when I was in there my son was doing tasks that were too easy for him, but in his teacher's defense it was her first year teaching at the school and I'm not sure she was used to having 3 out of 16 Prep children reading at level 30 by the end of term 3 (with another 5 not far behind) lol!
My son could not read before he started school and I'm convinced it was because he considered reading something you could only learn to do once you were at school. He could write simple words, such as 'cat', because he would sound it out, but if you showed him the word 'cat' to read, he would yell out 'feather,' or some odd word that didn't even start with the same letter

We wondered if he had some kind of dyslexia lol! Once he got to school though, and all the other kids were learning to read, he picked it up effortlessly.
It's great that there is another child at your daughter's creche who can read. She must love her knew skill -the world really opens up for them once they can read doesn't it?
Annabel.