I remember seeing some of those Laurel and Hardy movies in Spanish. Indeed, they read their lines phonetically in Spanish, and -as RealityChuck says- part of the thing that makes it tremendously entertaining for native Spanish speakers is that they skewer the language mercilessly. Their accents are beyond hideous and go all the way round to being hysterically funny!
As to why no dubbing in early movies – possibly the technology was not well developed enough, and perhaps it was cheaper to just re-shoot the movie in the appropriate language.
As a matter of fact, there is a French-language version of “M” by Fritz Lang (with most of the original actors speaking French) and a Spanish-language version of Bela Lugosi’s “Dracula”, with all different, native Spanish-speaking actors. That Spanish version of “Dracula”, by the way, is extremely interesting to see – The whole movie is basically the same as the English original, BUT – because the crew were able to see the English-language dailies, they could try and improve them by thinking of better camera angles, better lighting, etc. Also, it is longer than the English-language original (104 vs. 85 minutes), so it has more time to set up situations and present characters.
The only actor allowed to see dailies was the one that portrayed Dracula – he was encouraged to imitate Bela Lugosi’s performance. The rest of the actors are “themselves”, and the characters come across somewhat “different” from the English-language original, which adds interest to the whole movie.
Link with information on the Spanish-language dracula: http://en.wikipedia.org/wiki/Dracula_(Spanish-language_version)
Apparently, in the early days of sound, it was VERY common to re-film movies in different languages.
P.S.: Some “Dracula” trivia – When Bela Lugosi played the eponymous count in the theatre, he still didn’t speak good enough English, and learned all of his lines phonetically. By the time he filmed the movie version, he already knew English well enough, but he was told to keep the “strange” intonation he used in the theatre.