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Spellchecker does not work in Book View. You have to be in Code View to see misspelled words highlighted. Right-clicking on the red-underlined words will give you suggestions for replacements or the ability to ignore/add to dictionary.
Clicking the SpellCheck button will also bring up a list of misspelled words as Kevin already mentioned. Clicking on a misspelled Word in that dialog will take you to the word (and highlight it) in Code View. It will also offer you replacement suggestions and the options to ignore or add to a dictionary.
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