I think kids move very quickly to sight reading. I don't even know if the distinction is really valid. I did give DS one of those non-sense word tests and he didn't do as well as I thought he'd do. he reads words in context extremely well etc and decodes when he needs to.

I saw reference to a study at the SWR yahoogroup. The study was done in ENgland. Kids who read well and spell well use the same part of the brain for both but kids who read well and spell poorly use different parts of their brain. I'd love to get my hand on the original research!