My oldest was an early reader by age 3 reading primers. Because I had been a ps reading teacher and he seemed to want to read I taught him his basic sight vocabulary right away. It worked to homeschool him at home through preschool years, we did montessorri later so he could be with kids in a wide range of abilitites so he was not looked at as a freak/unusual, he was in 6-12 year old room by age 6 and worked with the 12 year old materials and friends but interacted with his age peers as well. We tried public schools but he did not fit in very well with his age group and was not challenged at all even by advanced classes.
Something common among kids that are very gifted is a lack of social skills. A popular point of view among some public school teachers is that early readers do have some advantage, but that by 3rd grade most children are on equal footing as far as reading skills. There are some really wonderful books about gifted kids out there and how to meet their special needs.
Another consideration is my son is now extremely nearsighted- he reads HOURS each day for the last 9 years, I did not take care to ensure he was getting large enough print early on and adequate light at night reading in bed.
He also read things that caused him a great deal of grief and worry, like an AIDS poster above a water fountain at a public place when he was 5, way too young to have to worry about AIDS. Be on guard with your young reader to look carefully at his world, not just prereading his books, but like the other poster said, watching not to leave the newspaper around, my son would also check our quicken and worry about the checking account if he could see that while I was typing on the computer screen. He even found and read the mortgage papers on our home.
Now we are homeschooling him again, he is happy with that. He is 13 and started some college classes this year. Based on my experiences with my oldest, we have not taught or pushed our younger children into reading just let it come slowly. I do not see it as a big advantage in any way.