Although I haven't watched Scrabble (as it relates to seeing the entire run) in quite a long time, I actually re-watched a couple of episodes and some clips not too long ago (about 2-3 months ago. Since a contestant was up against another, they had to answer 3 or 4 in however long it took, with his or her opponent having the chance to do the same with the same correct words in less time (for the championship). So with one letter, if the person miss it, it was discarded, but not with more than one.
That was based on what I recently watched and what I can recall without seeing much else in years. I did target all the segments with all the different rules; there was a contestant who took a minute and a half because he twice buzzed in inadvertently. The second time he was down to one letter for the word Rudeness but based on the clue, he thought it was something else. Didn't help when he knew an answer he didn't hit the buzzer right away to stop the clock.