My dd10 is the polar opposite. Your thread title made me think of her b/c she has spelling in her homeroom class and vocab in her GT reading pull out. They use Caesar's English which deals with prefixes and suffixes as well as other whole words. She generally gets all of the definitions correct, but she keeps missing points for misspelling the definitions or the words themselves. That bugs me a bit b/c it isn't a spelling test yet she'll get no points for getting the definition right but spelling it wrong.
I see this as reinforcing spelling. No matter if they are writing a story or defining a word they should attempt to spell it right and taking a point off just might encourage them to try harder. Spelling isn't just for spelling tests.
