Right now, I think this game is a good concept: It's basically like codebreaker. If you can master something like this, you can do pretty well with most word games would be my opinion. It's definitely challenging to me even as an English major.
It flows well, and I get no lag from the operation of the game.
Buying a letter is very Wheel of Fortunesque, and I was half tempted to hear the jingle when I bought one. It would be a good sound effect to add if you wanted to spruce the game up a bit more.
The problem is, most of these words are way too long and, like others have said, there's no general category for them, so it's basically a lot of guess work. I would try to make sure that the game, at least at the start, has generally shorter words as an introduction or at least a tutorial section away from the actual game where players can get accustomed to the game with smaller words before heading out into such 8-12 letter gems as incompetency and hysteria. I'm not saying to dumb it down, just ease into it a little more.
Other than that, I was originally confused with the letter pool at the bottom vs. the letter pool at the top. Once I realized you don't use every letter it wasn't as bad, but I think another thing that might help a bit is, instead of using all 26 letters to choose from, make it so that only the relevant letters to the puzzle at hand are in the top bar and get rid of the bottom word pool altogether. It would give players a better sense of direction when trying to figure out all the words, and since all the letters in the cypher are the same, the added 8-10 which aren't used is just a bit of overkill on the challenge.