Basically: Do children gain more from not being constantly put down for spelling and grammar when they are still at an early age than what they lose by being left to figure it out for themselves by reading (instead of figuring it out when the teacher's red pen tells them they are a failure).
At my sons' school, they have spelling tests. The rest of the time, they mostly let spelling mistakes slide. If they are writing something for literacy class, their grammar gets corrected, otherwise mostly the teacher lets it slide. IMHO this is a good thing, as the children get to feel good about the "well researched!" comment on their school project without being turned off all schoolwork by constant reminders that they are lagging behind on spelling and grammer (due to their first language not being English).