My main placement is in a first grade classroom. We started off writer's workshop this year drawing pictures and then writing a phonetic sentence that explains the picture. As you circulate the room and certain students need help spelling a word, it's hard to have them sound out the sounds correctly and still come up with the wrong answer. The English language has so many rules that don't make any sense, it's hard to think that correcting students at an early age couldn't help later.
In other words, I think that "invented spelling" helps students grasp the main ideas of reading and writing, but if left for too long I think it could definitely hinder language development.
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Random Note:
I observed a Kindergarten a few days ago at my dyad placement. I watched the students explore words throughout the classroom. The teacher had them concentrate on finding a certain letter ("T") in words that were anywhere in the room. Once they found a word with a "T" in it they copied the word on a piece of paper. This was letting them explore words, one of the kids had a realization that he actually had a T in his name (by looking at his name tag). While this small group went on a letter hunt, another small group worked on rhyming words. But the teacher made the activity hands-on working with rubber stamps. The students had to find two stamps that rhymed and then stamp their paper. All throughout this activity you hear the students saying the words out loud so they could hear if the words rhymed or not.
