Considering the substitution of similar looking words (your example challenge/change) I was thinking about this:
Aoccdrnig to rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be a toatl mses and you can sitll raed it wouthit a porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe.
(not really any Cambridge research on this I believe, by the way)
What I see with my own DS is that he is pretty good at using phonics to decode words he doesn't know, but also by now he has accumulated quite a lot of words he does 'know' and no longer needs to 'decode'. However he is clearly still a beginner reader, and sometimes he encounters words where he THINKS he knows it, when in fact it is a different word that just looks similar to the word that he does know. Same first letter, same last letter, same or similar letters in the middle - like your challenge/change example. If he didn't 'know' change yet, he would approach challenge as a new word and decode it using his phonics. But as he thinks he recognises a known word he doesn't double-check by decoding, but just reads 'change' until he realises that it doesn't make sense.
It makes sense to me - I don't double check each word I read by sounding it out either, I only sound out new words (new to me). Only when something I read doesn't make sense do I check if I read it correctly. And I know that I read more precisely than most people (also more slowly). Therefore I don't worry much about this 'habit' of DS' and just encourage him to check if what he read makes sense and to reread if he got something wrong.
Regarding dropping words/introducing words that aren't on the page, I know it is not the same thing but it made me think of this little brain teaser:
Count the letters 'f' in the following sentence (lower case AND upper case)
FinÂished files are the result of years of sciÂenÂtific study comÂbined with the expeÂriÂence of years.
Very few people get the correct answer (first time round), which, incidentally, is six. (I got 5, so I am pretty clever ;) )
This goes to show that even when we are consciously LOOKING for something, our brain may skip over words.
Or, look at the first teaser on this page:
www.dailycognition.com/index.php/2008/08/13/7-illusions-illustrating-how-powerful-stupid-your-mind-can-be.html
I have got to admit that I got it wrong :)
So (just speculating here) I think when we ask beginner readers to read precisely every word on the page, we are asking them to do something that we do not do ourselves, despite regarding ourselves as accomplished readers.
I think it is still important to encourage beginner readers to read precisely, especially when they are 'reading to learn' (rather than 'reading for pleasure/enjoyment'). But just keep in mind that our brains apparently don't really work that way.