Val-
He is much like your DS still. He whips through a Frannie K Stein or Pokemon chapter book but struggles with a level 1 easy reader. Small words like 3-4 letters still throw him for a loop sometimes, even if he's seen then 200x. He reverses letters- on becomes no, or switches letters- that becomes what.
I've just let it go and decided that he just reads fast and things get jumbled. His comprehension is not being hindered by it at all. I've heard from friends that this actually gets better when they begin reading silently. DS still reads everything aloud.
Yes, yes. My DS makes these kinds of mistakes ("on" becomes "no" or "ou." His latest is "the" becomes "they").
Val