I agree that at ranges of three yards or less, you should be shooting from retention aka step 3.
At all other ranges, any range where the gun is in front of my face, I am focusing on the front sight (or am suposed to be focusing on the front sight).
A couple months ago I took a class called Handgun Combat Master Prep. The purpose of the class was to prepare you to pass the Handgun Combat Master test that Chuck Taylor came up with in the early 80s. The criteria is listed many places but I think this webpage makes it easy to see:
http://www.defenseassociates.com/faq.htm#q6 You will note that most of the test takes place at less than 10 yards. The class I took advocates shooting with one eye closed and focusing on the front sight for every aimed shot. One of the "tricks" they teach in the course is to close your non-dominant eye when you begin your draw stoke and train yourself to focus your eye at an intermediate distance so that when the gun comes up to your eye, your eye is focused at the distance of the front sight. I am finding this very difficult to do, but I honestly believe you can do it with enough dry practice time under your belt.
Keep in mind when viewing the times for that master's test that the time includes the turning of the targets, so, if the time is 1 second that means that the target is facing 90 degrees from you, when the target begins to turn you react drawing your gun. So, even though the time is listed as 1 second, you really have less than that to engage the target. I am a believer in using my sights for every shot (other than retention). If I can react, draw, and fire an aimed shot in less than 1 second then I don't see any reason why I shouldn't use my sights for every shot. In fact, during this class I didn't have much trouble getting my shots off in time. The problem wasn't time. The problem was accuracy. I lost too many points to bad shots. Shots that either were not in the "A" zone or shots that didn't even land in the scoring rings. In the portion of the test called "small targets" and the part called "Hostage situation" and the part called "odd angles", you are NOT shooting at a silhouette target that is standing facing you. The target is smaller than that. These targets are intended to represent situations where you can't see the whole bad guy. He might be partially behind cover, he might be partially behind a hostage, or you might only be able to see his knee cap. Again, accuracy matters and you might even need pinpoint accuracy. This is why I personally feel that you need to practice with a focus toward speed AS WELL AS accuracy and never settle for where you are now in either aspect of shooting. You can always shoot faster and you can always shoot more accurately. Train to always improve both. You never know for sure if your skill in either catagory will be enough to win. If you feel that you can shoot good enough right now to hit an adversary COM at five yards by not using the sights, ask yourself if you can shoot well enough to hit him in the head with your wife or kids standing in front of his face and only a small portion of his head is visible ? You get one shot and one shot only. And it has to be quick. The bad guy isn't going to give you and extra .3 seconds to ensure your sight picture/sight alignment/trigger control: you need to make that one shot count or your loved one dies. If you can't, then you need to train more and very possibly find a more accurate technique. And, if you find a more accurate technique, why wouldn't you use it all the time ?
When training, try to get away from the idea that the target has to be in full view of you. Anyone with any sense is going to be moving and/or behind cover. Even if they are not moving or behind cover they might not be facing you directly. They might also be behind concealment without even thinking about it. What if they are standing on the opposite side of a car or something. Point is, training to hit COM or the "A" zone of a silhouette isn't good enough.
A brief disclaimer: the term Handgun Combat Master is simply a name for that particular test. Obviously there is no combat involved in the test. I am not sure why Mr. Taylor decided to use the word "combat" but I would imagine it was simply a word used to describe combat type shooting as opposed to bullseye type shooting (this was before IDPA, IPSC etc). I don't think he is implying that someone who can pass this test will be able to do anything special in actual combat. The people who taught the class I took made it clear at the beginning of the class that some of the stuff we were going to learn had actual street applications and other stuff was simply a gimmick used to pass this test (which is the goal of the class). During the class they commented with every new technique whether in their opinion the technique had any application outside the classroom.