The dispersion mechanisms in a clay-based polymer nanocomposite (CPNC) during twin-screw extrusion are studied by in-situ rheo-optical techniques, which relate the CPNC morphology with its viscosity. This methodology avoids the problems associated with post extrusion structural rearrangement. The polydimethylsiloxane (PDMS) matrix, which can be processed at ambient and low temperatures, is used to bypass any issues associated with thermal degradation. Local heating in the first part of the extruder allows testing of the usefulness of low matrix viscosity to enhance polymer intercalation before applying larger stresses for clay dispersion. The comparison of clay particle sizes measured in line with models for the kinetics of particle dispersion indicates that larger screw speeds promote the break-up of clay particles, whereas smaller screw speeds favor the erosion of the clay tactoids. Thus, different levels of clay dispersion are generated, which do not simply relate to a progressively better PDMS intercalation and higher clay exfoliation as screw speed is increased. Reducing the PDMS viscosity in the first mixing zone of the screw facilitates dispersion at lower screw speeds, but a complex interplay between stresses and residence times at larger screw speeds is observed. More importantly, the results underline that the use of larger stresses is inefficient per se in dispersing clay if sufficient time is not given for PDMS to intercalate the clay galleries and thus facilitate tactoid disruption or erosion.