Ok. Let me explain what I learned after a week of struggle.
First of all, the way that the touch does spell checking for PDF and AZW is different. For AZW the language setting of the book must match the language setting of the dictionary. If your Spanish dictionary is encoded as English a book encoded as Spanish will not see it. No simple way to override. Most old dictionaries on Amazon were encoded as English. Many have been updated to their correct language.
Based on this new encoding scheme you should have a default dictionary for each language. Your dictionary screen should look like this.
If the dictionary is encoded as English it will appear within your English selection and look like this(Note English dictionaries title at top):
Your choice is to re-encode books as English in which case the Touch will first check the default dictionary and then the other dictionaries until it finds the word. Problem with this is that it will find English SOY and use that instead of Spanish SOY. The other choice is to get your hands on properly encoded dictionaries.
Amazon gave me a refund on my old dictionaries and I re-bought them. Once the MW Spanish had been updated and the Barrons German had not. Good luck.