It seems to me that MSV is precisely the method that illiterate people use to fake literacy. Likewise for people who've developed a very minimal foreign language proficiency--they can get by in certain contexts but they're not in a position to constructively build fluency. If MSV were sufficient alone such people (and I include myself when it comes to foreign language proficiency) wouldn't be stuck at a dead-end.
MSV is obviously an essential skill, just not for acquiring foundational literacy. For one thing, early readers already understand the vocabulary. At that age they wouldn't be reading words like "benign" or even "tough"--some children might not fully understand them, but in any event learning to identify and distinguish such words is unnecessary at that stage. The primary task is to teach them how to identify enough of their existing vocabulary on the page that they can read sentences, paragraphs, pages, books, etc--enough to support basic narratives and concepts, especially unfamiliar ones. Only once they can read proficiently can reading become an independent channel for language acquisition and comprehension, where higher-order reasoning skills like MSV can be constructively applied, including toward furthering their literacy.