GWagner,
You are correct. A sloppy copy, or first draft is the two star. Once they write it again in their best writing with spelling and grammar corrected, that is three star. I had trouble with students even writing a decent 2 star. I made them a template to fill in and then they are to copy the entire letter for three star. I am planning to phase that out for the second half of the year. I hope this helps.
I made some tweeks to the the UHM because I had students still failing to complete homework. Check out my blog for a complete description.
www.mrscrookswbt.blogspot.com