Banging away on one of her favorite toys, 3 1/2-year-old Katelyn Smith shut out the usual sounds of her living room in Herndon, her baby brother crying and her mother fussing over him.

The little girl's fingers pounded the blue and red plastic letters of the alphabet on the foot-long rectangular gadget, which talked back to her: "K sounds like kuh, kuh. T sounds like tuh, tuh."

The toy, called Phonics A to Z, was a gift last November, and Katelyn plays with it nearly every day. She walked her fingers across K-A-T-E-L-Y-N and knew she'd spelled her name. She touched O and X and said "OX!"

Her mother, Susan Smith, said there's no doubt that the toy is helping Katelyn understand letters and words.

"If we never had it, she would still learn to read," Smith said. "It's just a good thing. If it broke, we'd probably go out and buy another."

Toys such as Katelyn's have become a booming business fueled by parents who believe that an early dose of phonics will help their children learn to read--and who fear that their local schools may not be providing enough of the instruction. Sales of phonics toys in stores have more than doubled this year, according to the companies that make them, and more elaborate phonics games ordered by phone also are selling briskly.

But educators are divided on the benefits of the toys, in a debate that mirrors the often-fierce disputes about the role of phonics in the classroom.

Some say the toys provide valuable practice in recognizing letters and words, and they note that phonics--the method of having children sound out the letters and syllables in words--is widely acknowledged to play a part in the development of reading ability.

"These games can support some of the skills that you need to have in both reading and writing," said Peggy McNamara, co-director of the reading and literacy program of the Bank Street College of Education in New York City.

Others say the makers of the products--some of which come with money-back guarantees of improved reading skills--are making inflated claims. Some critics also worry that playing with the toys too much actually could discourage preschoolers from looking at books or that parents who buy the toys will mistakenly think they can cut back on reading to their children.

"My personal feeling is parents would be far better off to spend their money on books," said Carol Santa, president of the International Reading Association, a professional organization of 90,000 reading specialists and English teachers. "Phonics is a tool for helping children with reading, but it's only a piece of it."

The toys and games, many of which fit in a child's lap, range in price from about $15 to $65. Some are geared toward 3- to 5-year-olds, while others are designed for children as old as 8 or 9.

Dan Lafferty, electronics buyer for Zany Brainy toy stores, said phonics and math games are the most popular of the educational toys the stores carry.

VTech, the company that makes Phonics A to Z, sold nearly 200,000 phonics toys in the first six months of this year, compared with about 75,000 in the first half of 1998, said Gary Masching, chief executive officer of the Wheeling, Ill.-based company. LeapFrog, based in Emeryville, Calif., which makes most of the other phonics toys displayed in stores, is projecting $70 million in revenue in 1999, compared with $30 million last year.

Thousands more parents are using the telephone or Internet to buy Hooked on Phonics or the Phonics Game, which sell for $200 to $284.

Phonics is also undergoing a revival in American classrooms, partly in response to complaints from parents and public officials that schools were abandoning the teaching method in favor of the "whole language" approach, which emphasizes exposing children to literature and getting them to recognize words from the context of a story or accompanying illustrations.

Most school officials in the Washington area say their districts use a combination of both methods. But some parents say that phonics is still not getting the attention it deserves, and many of those buying phonics products say they are trying to make up for what their child's school isn't providing.

Elizabeth Fitzgerald, of Sterling, said the phonics toy she bought for her son Adam, now 8, helped him greatly. But it has stayed in the closet as his 4-year-old sister, Grace, begins to read.

"She had a [preschool] teacher who was very strong in phonics," Fitzgerald said. "If she didn't have that, I think I would have pulled it out of the closet and used it."

But some educators warn that preschoolers using the toys may be too young in some cases to understand the concept of phonics: Letters make sounds that combine to make words. If parents try to introduce that notion too soon, it could kill a child's interest in reading, said Carol Coppel, an early childhood specialist with the National Association for the Education of Young Children, a nonprofit organization in Washington.

"The kid hears it, but he hears it in this strangely disembodied language," Coppel said. "If you say that's reading, why would a kid want to do that?"

Officials at the toy companies said the products are not intended to be a substitute for books.

"Our products do not take the place of books or the parent hopping up onto the bed at night to read a story to their child," Masching said.

There have been no independent studies of the effectiveness of phonics toys. Officials with the companies said the products were developed in consultation with reading specialists, and the creators of the Phonics Game and Hooked on Phonics said they have sponsored studies that show their products work.

Some of the toy makers' claims of success have drawn controversy. In 1995, the Federal Trade Commission reached an agreement with Gateway Educational Products Inc., the company that created Hooked on Phonics, in which Gateway promised to stop running ads claiming that the game could teach anyone how to read. Soon after that agreement, the company filed for bankruptcy.

With a new owner, Gateway Learning Corp., and a retooled program that includes not just phonics drills but also stories, Hooked on Phonics is back in business and has softened its claims. It now comes with a money-back guarantee of a "dramatic improvement" in a child's reading ability in four weeks.

"If you don't see results, we want the program back," said Chip Adams, chairman of Gateway Learning. "We know our program works. But we're not saying it's magic."

Ads for the Phonics Game offer a refund if a child's grade in reading or spelling does not improve by a full letter.

Gary L. Adams, who owns an education consulting company in Seattle, said that such claims can wind up doing harm. If children don't improve as quickly as the program promises, he said, they conclude that it must be because they aren't smart enough.

Jonathan Bogner, vice president of marketing at Games 2 Learn, the Costa Mesa, Calif., company that makes the Phonics Game, said he did not know how many refunds the company had issued. But he said the figure is no higher than the average for a company of its size.

Increasingly, the phonics products are being purchased by schools. An estimated 2,700 schools have bought Hooked on Phonics, Chip Adams said, and Games 2 Learn has pitched the Phonics Game in letters sent to 500,000 teachers nationwide.

In June, LeapFrog won an endorsement from the California Department of Education that allows the state's school districts to buy its toys with state funds, and the company is trying to work out similar arrangements with other states.

Elementary school principals in the Washington area said they are noticing more mail solicitations from phonics companies, but they said their districts have not developed guidelines on how to determine which products have educational value.

Preston Coppels, principal at Hillside Elementary School in Ashburn, said a few of his teachers have bought some phonics games, using school or PTA money.

"It's just kind of hit or miss," Coppels said. "There's a lot of junk out there."

Browsing in the Kay Bee Toys store at Tysons Corner, Kim Stanfield eyed LeapFrog's Fun & Learn Phonics Bus for her 2-year-old daughter, Gabrielle. Along the sides of the yellow plastic bus are letters of the alphabet that recite their names and sounds when pressed.

It looked like something that could help her daughter prepare for entering school, said Stanfield, who lives in Prince William's Lakeridge section. She said she may not buy the toy until Gabrielle is a bit older. Then again, she said, you need to start early.