One possible explanation is that the word contexts allows subjects to guess the missing letter.
e.g. given R_AD subjects could guess O or E
Reicher (1969) showed that word context improves the perception of single letters independent of word level guessing.
Presented a target letter in a word (READ), a non-pronouncible non-word (AEDR) or by itself (_E__), replaced after a brief delay by a mask flanked by a pair of letters in the target position.
E
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O
Subjects were better at identifying the E in a word context even though O is a valid completion.
