Not tedious at all actually. How did you deal with words you were unfamiliar with?
Context - the surrounding words I already knew.
Boy was I surprised when I found out how "Archaeopteryx" was actually pronounced, though.
Not to be pretentious, but I'm an anomaly, obviously. I was very fortunate to basically just have good genes for reading comprehension; I also had a good environment, was the last of 5 kids with the nearest sister 10 years older than me, giving me essentially extra parents, and was read to a lot, but other than that, there was nothing particularly special about my upbringing. Neither of my parents went to college, but they were smart people.
However, my experience suggests to me that there probably is a substantial segment of kids for whom sight-reading is going to be more effective than phonics. As has been mentioned, you're eventually going to be sight-reading anyway as an adult. There's perhaps 1-2% of kids such as myself that don't actually need to be "taught" to read at all. I'll take a SWAG and say there are probably another 10-20% of kids for whom phonics is a waste of time, and they should start out sight-reading.
This reminds me of when I was little. (Yes, I too taught myself to read at 3, just by memorizing my favorite books.) I actually remember this, which took place when I was about 4.
I had a little kids' magazine, and in it was an illustrated story called "How the Squirrel Lost His Patience." That last word, "patience," was unfamiliar to me. So I decided it said "panties." I laughed myself SILLY through that whole story!!! It was hilarious, my way!
Basically, when you sight read and don't know a word, you let context fill it in. Eventually you become familiar with an awful lot of words, if you read enough.