Suzanne:

Yes. The proposed dictation machine would be expected to spell and punctuate correctly and should be able to resolve homonyms in most cases by considering the context. It is allowed to ask for clarification no more than one word per one hundred sentences, on average.

This is a formidable task and will require some advances in the field of Artificial Intelligence. We take the process of hearing language for granted, but from an engineering standpoint it's an awesome feat. Programmers have been working on this problem for decades. As Paul mentioned, DEC is closing in on a solution, as is IBM. And if these attempts should fail, I believe more exotic approaches, such as Neural Nets, will eventually succeed. The only question is can it be done cheaply and before the year 2000. Stay tuned.