Value of Good Spelling

I'm reading Timed Writes from my Spanish 1 and 2 students and pondering the relative value of good spelling in the first 100-200 hours. If a kid writes it "othro" for example, and another correctly writes "otro", but the latter says something in his head and in speech more resembling the hard-T English pronunciation... Is the first student therefore better off in terms of L2 proficiency* if all other variables are the same (speed, breadth of vocabulary, etc)?

Isn't the ability to process aurally and produce orally in the first 100-200 hours much more important than being able to produce with more accurate spelling? If you had to end the year with one of the two hypothetical students above, Which would you pick?

Maybe we put too much stock in spelling outcomes in the first couple hundred hours of study.

To question further, Is there really a substantial correlation among beginners between L2 proficiency and L2 spelling? Or does the stronger correlation lie with L2 spelling and L1 spelling? My inclination is with the latter.

Krashen argues that spelling ability comes from reading. I don't think our level 1 and 2 students will see nearly enough of the language we want bouncing around in their heads to make any substantial difference in their spelling accuracy, without compromising the time spent processing aural language in different contexts. And kids hearing what they're reading, versus images they're seeing with their eyes and minds, is not nearly as compelling IMO, particularly in those first 100-200 hours.

And maybe I'm just not great at getting beginners to spell well. So... What do you think about these questions?

*ABILITY TO COMMUNICATE

“. . . ABILITY TO USE LANGUAGE IN REAL WORLD SITUATIONS IN A SPONTANEOUS INTERACTION AND NON-REHEARSED CONTEXT” (ACTFL PERFORMANCE DESCRIPTORS FOR LANGUAGE LEARNERS, 2012, P.4 via acquisitionclassroom.weebly.com)