When I'm playing something I know note for note, I generally play it from memory. I have tried to force myself to read the music as I play, but I find that a few measures into it, I'm not really focusing on the music, but drawing it from memory. I always find when I play solos that memorizing it tends to bring out more musicality than looking at the page....maybe it has something to do with my own focus level, or the possibility that reading the music slows me down a bit in some ways.
As far as sight reading goes, I don't think sight reading something you already know is very effective at all. Once you become familiarized with the piece, it is no longer sight-readable; you must be pulling some part of it out of your memory - whether that is the rhythm or the intonation. Sight reading is a one-time thing, and once you sight read a piece, it cannot be done with that particular piece (or that section, in any case) again. My best suggestion, if you're looking to improve on sight reading, is to get some simple solo books, or maybe a book of etudes or orchestral literature. Work your way through the books, and focus on perfecting your rhythm and intonation sight-wise. Work with your teacher.
In any case, those books will still be helpful even after you're done sight-reading them; you can still use them for solos, etudes, or orchestral practice.