I only have the anecdotal experience of a student I work with who is non-verbal with four limb CP. She really struggled with phonics and she said that making the movements with her hands (even with hand over hand) enabled her to remember the letter sounds better as she had some form of muscle memory. As she could not sound out the letters she found it useful to have this other way of 'fixing' the letters in her head and differentiating between them. In my expereince in teaching EYFS the 'expereince' of letter formation is helpful as again it is another way to help students to differentiate between the letters and fix tem in their long term memories.
It is also worth mentioning that although this helped this young lady learn the intial sounds she still struggled with digraphs and the skills of blending and segmenting so we ended up going on to whole word reading strategies to move her literacy skills on further.
Of course all students are different and although this worked for this young lady, it may not be beneficial for others. I was lucky that she was articulate enough to explain herself using her eye-gaze communication aid to tell me what worked and what did not. I know this is not always the case for some of the students we work with!
I hope this is of some help!

Please can you point me to the research you mention about handwriting? I work for a touch typing company and have seen so much benefit from the muscle memory and use of the kinaesthetic skill centre in the brain (stems from Nicholson’s work on automaticity). But it requires proper touch typing for the skill to work, most studies I’ve seen don’t have kids who type by touch.

Hi Hester, that's really interesting thanks.  We have found that touch typing at around the age of 7yrs old can be very helpful (although depending on the physical capability); the Ed Psych who designed our program did adapt it for little girl with CP who only had full use of one hand and did the space bar with her thumb on the other hand.  She learned to touchtype and it made a huge difference to her written work - but this is anedotal too.  EYFS can be a bit young, especially with small hands - although there are mini keyboards out there which are useful.  I do know quite a few schools who have their 6yr olds typing at 30 words a minute after a year of practice, sometimes kids are amazing!  They still practice their handwriting too though!

To Maggie's original question, we have seen huge improvements in spelling through typing by touch once the muscle memory is in charge - the spelling pattern is finger movements not a string of letters.