So, for the first line, I covered the "ty" of the word Patty with my finger. After my student sounds out "P-a-t" and says "Pat," I move my finger to reveal the whole word and say "the ending says "teee." So, this says "Pat - tee." He blended the two parts to tell me it said "Patty." Some of the smaller words we hadn't worked on yet as sight words I just read for him.
Maybe some kids can take on all these concepts at once, but for my son, sounding out the simplest words with the vowel A was the point of this activity. Much more than that and he would've become overwhelmed and shut down. That wouldn't help him learn anything. Since there was no pressure to do anything but review the skills he's already learned, he actually picked up on reading a couple sight words without any prompting after I'd read them the first time. The key to this kiddo is keeping him relaxed while he learns. Since this was a familiar rhyme, it worked great for practice.