We're so glad the second character was your favorite, we really wanted him to have an impact!
As for the damage-to-word-length ratio, you are correct in assuming the longer words deal more damage. I think, to your point, it would be a great idea to add some sort of visual indicator (other than health bar) that the attack had bigger impact... perhaps some dramatic particle effects? thank you for the feedback!
That character recognition idea does sound very interesting... maybe the same game remade with a Samurai skin ;)