mslil65: Being that your son isn't even 4 yet, I'd say "relax and have fun" and you'll be amazed at how much learning is done. I think you're on the right track of backing off the workbooks at his age and doing the cutting/pasting type activities. I also have to say that I bet you'll see a big difference in another 1/2 year or so.
Here's my 2 cents worth - if you weren't homeschooling your son, he'd barely be in preschool with kindergarten a year or two away. What do most preschool teach? Learning through play and STARTING letters and numbers. Most kindergartens in our area have to cover letters and numbers again (because not every child goes to preschool) and then TOUCH on beginning reading.
My oldest son was so far ahead when he went to public kindergarten that it was EXTREMELY boring to him (and frustrating).
Well, having said all of that, I don't homeschool to keep my kids at public school "level" (don't flame me - I just believe in going at the child's pace, sometimes that's slower and sometimes faster). So here's my other 2 cents: You can have a "school schedule" for your son - only have it based on a 2 hour or so school day. Be sure to have story time, snack time, art time, music, letters/phonics, and numbers. You can add kitchen time (helping fix lunch or setting the table), free play, and puppet playing to your schedule, too. Whatever you'd like to do. Also, you can vary slightly from day to day, but the idea of having a schedule is to have consistency so I don't vary more than one thing per day. For instance, music on Mondays and Wednesdays, but puppet plays on Tuesdays and Thursdays.
Here's another suggestion that works for my DS4 - I only "allow" him to do two workbook pages - his choice most of the time - he can do 2 letter pages, 2 math pages, or one of each. Then I say "boy, you did well at tracing those letters (or something like that), so if you'd LIKE to do one more page you can, but you don't have to." We also make a big deal of putting his finished work into his own school folder. Those two things combined helps get some workbook pages done, which makes me feel better.
I love the unit study type approach, which is basically what you're doing with "littering his path" with experiences and then further developing whatever he's interested in (like bugs!!!). You can incorporate that into learning letters and numbers. Like you said - counting bugs - that's math and is a GREAT way to teach. Want to incorporate letters - "bug starts with b", so learn the letter "B". Believe it or not, you could see how many bugs you could get on a paper (with the letter B printed on it, of course) at the same time - letters and numbers!!!! Or, put some sugar/honey in the shape of a "B" and see if you can "capture" some bugs.
All of that IS homeschooling for a 4 year old.
You are completely on the right track. Relax and go at his pace. Follow his lead on what he's interested in. Use a schedule if you'd like, but it can wait another year or two if you'd rather. Keep reading - the LOVE of books is one of THE BEST lessons you can ever teach!!!!
As far as wondering if you're doing the right thing - we all wonder that sometimes (it's a brief thought for some and linger for others, but we all have thought it). On those days, ask yourself "is there ANYONE who cares about my child more than I do? If he was in a class of 20 or more, do you think he would have had a better day? Is every day in public school a great learning day or do they have "down" days, too? Would he be better off at going at the pace decided by the classroom teacher or his mother?" Every day our kids are learning something - they're going to either learn it from others or from us.
Well, I'm sorry that this post got so long. Obviously, us homeschooling moms can get VERY passionate about what we do

Take everything I've said with a grain of salt and do what's best for you and your son!!!!!