Central questions in the study of visual word recognition and developmental dyslexia are whether early lexical activation precedes and supports decoding (a dual-stage view) or not (dual-route view), and the locus of deficits in dysfluent reading. The dual-route view predicts early word frequency and length interaction, whereas the dual-stage view predicts word frequency effect to precede the interaction effect. These predictions were tested on eye movements data collected from (n = 152) children aged 9–10 among whom reading dysfluency was overrepresented. In line with the dual-stage view, the results revealed an early word frequency effect in first fixation duration followed by robust word length effect in refixation probability and an interaction of word frequency and word length in summed refixation duration. This progression was advanced in fluent reading to be observable already in first fixation duration. Poor reading fluency was mostly explained by inflated first fixation durations, and to stronger word frequency and length effects in summed refixation duration. This pattern of results suggests deficits in early letter encoding and slowness in serial grapheme-phoneme conversion. In contrast to the widely held belief, the holistic orthographic processing of words seemed to be intact.