I think the thing to consider is what the purpose would be. One letter at a time kind of helps the player's eye follow along with a wall of text, and can also be used to imply something about phrasing (like if there's an extra long pause before a word, or if each letter in a word comes in more slowly). Meanwhile just putting the wall of text on the screen lets people read entirely at their own pace. It seems to me having text fade in would be like the wall of text but be a bit harder to read for the first couple of seconds.
I should point out that the fade in / out would be pretty quick and is just to make it look more elegant than making the text immediately appear. When the text fades out completely, then the dialogue menu would close with it.. Maybe it's not such a great idea, I was just trying to think of interesting alternatives.
One word at a time is nice, I suppose as long as the option to speed it up / skip to the next string is there.