In Hawelka and Wimmer (2008, Vision Research), young adult dyslexics and controls performed letter search on 5-letter strings. The target letter appeared prior to the string, and remained visible when the string appeared. Dependent variable was reaction time for detecting a present target. The authors found that the dyslexics were actually faster than the controls (with the same high accuracy) and concluded that "the slow reading speed of German dyslexic readers cannot be traced to inefficient visual processing of letter strings".
However, I would suggest that this conclusion is unwarranted. The task of detecting a letter within a string differs from the visual processing required for reading, where automatic encoding of all of the letters' positions within the string is necessary. Just because dyslexics are as fast as controls at detecting a letter target does not mean that they encode letter order in a normal manner. In fact, when processing requires fast automatic encoding of letter position across the entire string, dyslexics are notably impaired, as found by Hawelka et al. (2005; 2006, Vision Research), Enns, Bryson & Roes (1995, Can Jour of Exp Psych.) and various studies by Valdois and colleagues.
It is of interest to look at the RT patterns of the dyslexics vs controls in this letter search paradigm. Pitchway, Ledgeway and Masterson (in press, QJEP) did so for adult English dyslexias. They found an LVF advantage for controls, but not dyslexics. A similar pattern is also evident in Hawelka and Wimmer's (2008) data - numerically, controls were faster on position 2 than 4, but dyslexics were not. These patterns are consistent with my idea that normal readers perform rapid serial processing of letters of sub-parts of a single object (the string), whereas dyslexics process letters in parallel as individual objects.
The length of the string in these experiments (5 letters) is near the limit (~4) for the number of visual objects that can be processed in parallel. Thus dyslexics do not show increased RTs in the letter search task because they can process the five letters of the string mostly in parallel, but they do show a different RT pattern due to this parallel processing. For longer strings, the difference between the two styles of processing has stronger implications, because the rapid serial processing (at 10-15 ms/letter) allows ~10 letters to be processed per fixation, whereas parallel processing in highly-compensated adult dyslexics is probably restricted to 5 letters max, due to innate limitations on the visual systems' ability to process multiple objects in parallel. This accounts for the slow reading that is characteristic of dyslexic readers in transparent orthographies. (In English, dyslexics would have the same visual limit. Due to the irregularity, they may adopt the approach of processing only the salient letters, and guessing at the word. This yields faster, less accurate reading.)
Bergmann and Wimmer (in press, Cog. Neuropsychology) then examined performance of German dyslexics versus controls on lexical decision (LD) versus pseudohomophone decision (PD). (In PD, the answer is "yes" if the pronunciation of a pseudoword is a word, e.g., yes for "taksi", no for "tazi"). Looking at accuracy, they found that dyslexics were only slightly impaired (with respect to controls) for PD, but were highly impaired on LD. In fact, controls were better at LD than PD, while dyslexics were better at PD than LD. For RT, dyslexics were considerably slower than controls on both tasks.
This provides yet more evidence that, universally, the characteristic pattern of dyslexia is a limitation in the uptake of orthographic information, rather than a phonological deficit. However, predicated on their presumption that there is no deficit in the dyslexics' visual processing of strings, the authors place the dyslexics' deficits in three places: poor representations of orthographic word forms, slow connections between orthographic word forms and phonological word forms and slow connections between graphemes and phonemes.
But the data are explained more compactly via the proposal of abnormal, parallel encoding of letters as individual objects. This limits the number of letters that can be processed within a fixation. Furthermore, parallel processing probably also slows down grapheme-phoneme mapping within a fixation, as such translation likely functions more automatically under seriality. Both of these factors yield increased RTs. The parallel processing also prohibits the encoding of a string as a single object, which precludes normal representation of orthographic word forms, yielding poor LD performance.