I will teach spelling two-fold. (I say "I will" because my son is only 4, and just beginning to blend, but I've thought about this subject alot.)
Spelling is just the beginning of writing. As the child sounds out words to read, so he also sounds out words to write. Because of this logical connection, I plan to use word lists around the phonics rules. I know that Ruth Beechick has high-frequency word list, etc, but I will start with the phonics rules, applied to spelling, then work in high-frequency words, like from her lists. (I use Victory Drill Book as a resource for the progression of phonics rules.)
The second aspect to spelling is to know the meaning of the word. The LA program that I grew up with incorporated this wonderfully, and I have a very good grasp on spelling. So when it comes to the words that are high-frequency, and do not necessarily follow a phonics rule, I will focus on the meaning, using it in a sentence, and making sure they are reading it quite a bit. They need that mental picture of the word.
Like I said before, though, I have a four year old. I have yet to test my theories! :)
Sarah