My third grader has the same issue with applying grammar rules well in his lessons, but not in his own compositions or anything else he writes. After a bit of concern, I was assured by several other homeschool moms that that's totally normal for elementary boys. I have handled it by asking him to correct/write properly anything that is a school assignment, whether it's a science worksheet or writing lesson, and letting him just do his own thing for his own writing (journal, story, letter, etc.). If I ask him to write a thank you letter or something though I usually ask him to dictate his letter to me, write it correctly for him, and then have him copy it. That way it appears to the recipient that he took his time.
As for IEW, we are still new to it, but we are really liking it so far. He's at the beginning of working through SWI A right now, which is their video program for elementary. So far, he really likes the teacher on the video (I think he likes having someone else do some of the teaching besides me
, plus Mr. Pudewa tries to tell jokes and keep it interesting.) It starts out basic. The student is given a paragraph to read, then is coached how to create an outline for the paragraph. They then rewrite the paragraph in their own words from their outline. Other requirements are added lesson by lesson, so that by lesson 6 (about 12 weeks in), they need to "dress up" their re-written paragraph with a who/which clause, an adverb, a strong verb, a quality adjective, and a because clause. There are also certain forbidden words that they may not use like "said" and "saw" to make sure they choose more interesting words. Each assignment has a checklist, so that the student knows what to do. The parent sort of acts like the tutor/editor. Level A also goes through other of IEW's units like writing from a picture, doing a research paper, and creative writing, but we haven't gotten there yet, so I don't really know anything about it. BTW, you're not watching the video everyday. It's normally a long session once a week, and the rest is working on the writing assignment on your own with rough draft, edit, final draft.
What I really like is that it is more writing than I have ever gotten out of him before. He is enjoying it and asks to do it (which I'm assuming will wear off at some point). And it's teaching him to make his writing interesting without him having to come up with the whole idea for the paragraph by himself. I shelled out the whole $250 for both the teacher instructor videos (TWSS) and the student course (SWI) because I had a little extra money and think we may stick with it over the next few years. (Next year, I want to do Beautiful Feet's geography program, and IEW has a themed writing book for that course, so I thought we'd do that.) If you're interested, I think you could just get the student course, which is around $100. You could also maybe stretch it out over 2 years if you add in other assignments like letter writing, journaling etc. I've been learning from the teacher's videos, but they're really meant for someone that is planning on doing all the teaching themselves with their own samples or maybe going through one of their theme books.
Another cheaper option for you might be to keep doing what you're doing and add dictation in. We have used Writing with Ease for 3 years now (or there are many other products out there you could use instead if you don't like WWE) for narration and dictation skills. We did this as our main writing program for first and second, as well as the first half of third. I plan on doing a week or so of this instead of IEW once a month or so from now on. The great thing about dictation is that it works on spelling, grammar, and writing all at the same time, and it doesn't take that long because you're normally just doing a sentence or two at a time. It's supposed to be really good with teaching students how to "hold thoughts in their head" as well. When I do this with Kai, I read him the sentences 3 or 4 times until he can say them by himself. Over time, he's learned to listen for commas, periods, question marks, and even quotation marks on his own. I help him spell a word if he doesn't know one. For a while, we eliminated a spelling program all together because I felt he was getting enough from dictation, plus the workbooks are only like $20 on amazon. If you think that's something you might do, I'd recommend starting with level 2 because that's where dictation is first introduced. Level 2 starts out with one day of dictation, two days of narration, and one day of copywork, so you could accelerate using only the dictation days or do the whole thing if you think the other sections would be helpful. As yet another alternative, you could buy just the teacher's book for Writing with Ease (no workbook) which would guide you though doing dictation with any book of your choice, like your History book or read aloud.