isn't this one of those problems which turns into an n2, n3, n4 type problem, with n as a big number to start with?

I think dragonchild has a good algorithm, I would only add that, before looping you should make a pass over your dictionary and copy to a new file/memory-location all words that are composed only of the letters ACELNS. This way you will be able to conduct consequent searches on this small subset of the whole dictionary as opposed to the whole thing. This will optimize your O() a lot ( btw O means the speed at which each operation is made, don't think about it a lot if you're not familiar with it... )