Most moms would happily spend an hour a day teaching reading to a receptive child. So how about sitting with him for an hour a day while he plays video games, reading out the stuff he's struggling with? Take up knitting or cross-stitching, or read your own novel, or do sudokus or something if you don't want to follow every moment of game-play, but be there as his "reader." Give him the prompts he needs, read the text aloud when he asks. Help him connect words on-screen with meaning in his game play. Don't be all teachy about it unless he seems to want that. Just read aloud what he asks you to do. Chances are he'll ask for less and less help as he begins recognizing the words you've read frequently to him.
Early reading programs for later readers rely on three components: text that is meaningful to the learner, a format that is motivating to him, and text that has a tendency to be repetitive. Video game text gets three for three on this count, I would say.
ITA! I used to sit with ds so much when he was using the computer. I'd sit and knit while he played his Nintendo DS on the couch. Or I'd just come and read whenever he asked without giving him any sort of hard time (other than saying "when I finish this" if I was in the middle of something). He gradually asked me for help less and less. Sometimes he wanted me to read something when he thought he knew but just wanted to be sure. Any kind of "sound it out" or overt teaching efforts totally shut him down. It actually increased his frustration level because in addition to not knowing something, I was being a PIA instead of helping him. It's always worked well with him to just answer his question without trying to lead him to figuring out the right answer by asking him a series of questions (that always annoyed me as a kid, too). Most of the time, he had an idea of the answer. It isn't as if he was sitting there asking me questions without a thought in his mind. Keeping him at the point where he was willing to ask me questions was very important. For a while, dh tried to lead him to answers rather than just answering his questions. Ds just stopped asking him. Not a good thing. I had to explain a bit to dh how ds worked;-)
Because I was in the habit, I'd read something aloud that was on the screen. Eventually, ds started shutting me down, saying "I can read, you know!" Beautiful words:-) I remember when he was younger (7ish) and he'd state he couldn't read. That was something grown ups did. Then (8ish) he started saying "WHEN I can read." That was also a beautiful thing, a real leap, even though he still couldn't read, lol.