S.H.
First, have you had her eyes checked to make sure that she can actually see the words she's trying to read? Just a thought since you said her reading seems to be getting worse...
Assuming her eyesight is fine, the best thing you can do is read, read, read. Take her to the library, and let her choose books that interest her. Have her teacher recommend books that are at her reading level. The key is to pick books that are at or just above her level in order to build her reading vocabulary. When you read to her, follow the words with your finger. If she tires of reading easily, alternate pages with her -- you'll read one page, then she reads one page. Or let her play the role of one of the characters in the book so that every time that character speaks, she reads (and acts out) the words.
You can check out www.starfall.com for reading games that she can play on the computer.
At home, try this game... Write words on sticky notes that describe items in your home -- table, chair, door, etc. Then, have her read the words and stick the notes to the appropriate items.
Write her little notes from time to time. In the morning, put a note at her place that says, "Good morning!" or "What do you want for breakfast?"
When you make a grocery list, let her help you write some of the words (apples, bread, milk, eggs), and she can have her own list to follow at the store.
Point out words that you see when you're out and about. Read the signs for restaurants and stores that you pass, and try to sound them out together (at least the first sound). "See, McDonald's starts with M... mmm, mmm, McDonald's. Target starts and ends with T... tuh, tuh, Target."
Basically, try to read everything that you can -- on cereal boxes, in magazines, even on TV. And set a good example by letting her see you read. The more you show her that reading is important, the more she'll be interested, too.
Good luck!