One way that we practice spelling is with letter magnets. I got the magnetic boards at The School Box and I love that they have lines on them. Here are a few ideas on how to use letter magnets for spelling.
To practice "writing" their name, I place the letters to their name in a plastic bag and give them a sentence strip with their name on it. I think this is a great way for preschoolers to learn how to spell their name!
In one of their workboxes, I like to write a word that goes along with our letter of the week. I write out the word and draw a picture of the word.
Another idea is to get a set of flashcards and punch a hole in the top left corner. Place the set of flashcards on a loose leaf ring and your kids can pick a card and spell the word.
For more advanced spellers, you can use the ring of flashcards and have them spell the word on the magnetic board and then flip the card over to see if they spelled the word correctly or not.