From New Scientist vol 162 issue 2188 - 29 May 1999, page 55, a letter re a report of another paper (free trial/subscription required - fair use extract follows):
...This reminds me of my PhD at Nottingham University (1976), which showed that randomising letters in the middle of words had little or no effect on the ability of skilled readers to understand the text. Indeed one rapid reader noticed only four or five errors in an A4 page of muddled text.
This is easy to denmtrasote. In a puiltacibon of New Scnieitst you could ramdinose all the letetrs, keipeng the first two and last two the same, and reibadailty would hadrly be aftcfeed. My ansaylis did not come to much beucase the thoery at the time was for shape and senqeuce retigcionon. Saberi's work sugsegts we may have some pofrweul palrlael prsooscers at work.
The resaon for this is suerly that idnetiyfing coentnt by paarllel prseocsing speeds up regnicoiton. We only need the first and last two letetrs to spot chganes in meniang... [Graham Rawlinson]
[via Uncle Jazzbeau's Gallimaufrey]
I was trying to trawl back through the Net to find where I first read that passage - I'd definitely read this, from July last year, but maybe not until December.