We home educate and use a variation of the two ( old school and expressive writing). We let the younger kids write whatever they wish to, spelling mistakes and all, and then we mark the essay, story, call it what you will, in two ways. One is for content so the spelling, punctuation etc can be abyssmal but they still get 10/10 for that part if the content is good, then we mark seperately for spelling, vocabulary and punctuation. This way the kids get the best of both worlds in that their spelling is corrected but if the story is good then they still get a good mark, so it doesn't stunt their love of literature.
We also insist that they read good quaity works, and are read good quality works, from a very early age ( our eight year old has just finished Wuthering Heights, Jane Eyre etc on her own having had theseread to her when she was four or five previously).
I'm pleased to say that by the time they get to ten or eleven their spelling etc is quite good using this methodology.
It's handwriting we have trouble with!