I'm curious whether individual-word highlighting is best for people with reading disabilities, or a broad, whole-sentence highlighting might actually be preferable.

When I'm reading my eye is jumping back and forth across the sentence. The demo made this abundantly clear -- it was actually very hard to just track the highlighted word.

Just using the fact that I consider myself a very good reader as an example, I wonder whether there are advantages to the eye being free to skip back and forth across a sentence.

I assume it might be as simple as a user-preference toggle, since you're already highlighting the sentence.

You could also try UIs where the highlighting was more "spread out," focused on the word being said but bleeding into the other words on either side (maybe up until the hard stop of the sentence boundary) to lead the eye toward it. I'm imagining something like the red-blue text color of the BeeLine editor.