OP, I think that this is explainable a good deal of the time by a child having a good verbal vocabulary, and the spelling sounding enough like the word that the child can figure it out. The words' spellings don't have to sound just like the correct pronunciations, just close enough for the child to make a match to a word they know, which will be correct a good part of the time.
Think of it this way: when your child is pre-reading or in early reading stages, she has already developed the ability to remember sequences of sounds. Reading letters adds on a whole extra decoding layer on top of that, which increases the memory load and makes things harder-- and this is not even talking about beginning to blend sounds. Having someone else read the words, even though the individual letter sounds are different from the correctly sounded-out word, makes things simple by virtue of removing the letter decoding, and the letter sounds can still be matched to known words.
Re: remembering spellings of words read, I've trained my son to do that, and he seems to have improved to a large degree. My aim is to get him to remember words perfectly upon reading them the first time. I really don't care a whit about teaching him spelling from the perspective of intellectual development, as I know he'd wind up a perfect speller in time just by virtue of his attention to detail and the fact that he has a bent for it. Still, the local school seems to put a large emphasis on it, so it'll be good for him to stay (far) ahead of the pack.
