There is now an interactive version of the puzzle, which I believe better represents how the puzzle plays than does the image in this post. It should be a Win32 program; just unzip to the location of your choice and run "wordpuzzle.exe".
(The interactive version also incorporates some of the advice given in this thread, such as the option to include a few letters as a hint to each puzzle.)
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Original post, for archival purposes:
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My current game includes, amongst other things, a substitution-cypher puzzle. I have a specific instance that I want to determine the difficulty of, so that I can gauge how appropriate it is for the level in which it's encountered. I'm thus asking for feedback: how difficult is the attached puzzle?
[attachment=32083:puz.png]