Player A places a word vertically on the board in such a way that multiple horizontal words are made (in this case, the words of interest were ‘ZED’ and ‘DI’). Player B challenges the word ‘ZED’, at which point, a dictionary is consulted, and it is proven that ZED is a legitimate scrabble word. At this point, **Player B **challenges the word ‘DI’. This, as it turns out, is not a legitimate word.
So, the question becomes, whether scrabble challenges are in respect to individual words or ‘entire plays’. Much google-fu has been performed to no avail. And so perhaps someone can help us find a cite to prove what the generally accepted north american scrabble standard is for this situation.
Here is the official website with rules for Scrabble. Y’all were going about the game play incorrectly.
From the linked website, Rule 8 (bolding mine):
Any play may be challenged before the next player starts a turn. If the play challenged is unacceptable, the challenged player takes back his or her tiles and loses that turn. If the play challenged is acceptable, the challenger loses his or her next turn. Consult the dictionary for challenges only. All words made in one play are challenged simultaneously. If any word is unacceptable, then the entire play is unacceptable. Only one turn is lost on any challenge.