An automatic digital video image capture and processing system supporting image-processing based code symbol reading during a pass-through mode of system operation at a retail point of sale (POS) station. The system comprises an automatic object direction detection subsystem, disposed in its housing, as well as an illumination subsystem, an image formation and detection subsystem, an automatic illumination control subsystem, a digital image capturing and buffering subsystem, a digital image processing subsystem, and a system control subsystem. During system operation, the automatic object direction detection subsystem automatically detects the presence and direction of movement of the object in the field of view (FOV), and in response thereto, generates a first signal indicating a triggering event and a second signal indicating the direction of movement of the object with respect to the FOV. The system control subsystem is responsive to the first and second control signals, and controls and/or coordinates the operation of the subsystems above system so as to support image-processing based code symbol reading during the pass-through mode of system operation at the retail POS station.