sphil - lots of people responding about the spelling and the motor skills and age-appropriate-ness, so lots on input on that ... but sounds like you are also concerned at how difficult ds1 finds it to produce content in meaningful sequence, is that right?
That latter content-and-sequencing problem is our (that is to say, ds's) problem (much more than letter-formation or spelling). It's been quite stark this holidays, as dd (7) sits down to her thank-you letters, sticks her tongue out and murmuringly dictates herself through "... thank you for ... the lovely, no, I'll say ... beau - ti - ful ... book, I really wanted it. We had a ... lovely ... Christmas ...", whereas ds straightens the blank page, twists the pencil about, catches my eye and hurriedly writes the capital "D" of Dear ... and then stares out the window, shifts around the chair, scratches his neck - exactly like one of those twitchy tennis players. All the time with the blank page balefully glaring at him.
So, having read somewhere that "lack of self-talk" - as in, not having instinctively developed the skill (or strategy, not sure what it is) of talking yourself through a process - is something quite characteristic of boys like ours, I am trying to get ds to copy dd's dictating technique. So although he's quite capable left to himself (given 10 minutes ) of writing "Dear Auntie Flo", I get him to tell me what he is going to write, just a phrase or short sentence at a time, & then think it word by word in his head as he writes. It is a slow process but we end up with quite nice characterful lively nearly-coherent letters & FAR less trauma than if I expected him to generate the whole thing on his own. There is also usually a point in the letter when the logjam seems to ease & the later sentences run on much more easily than the first ones.
PS - letters to the tooth fairy are rather good practice. Unfortunately the TF round here has got into the trap of replying with Tolkienish depth - latest letter had to consider the plausibility of doing a Fairy Census, & what sort of graph you might use to present the findings. So, if your TF is tempted to do anything similar, be forewarned.
[Sorry this is a typically wordy post. But we know each other by now )