In comments yesterday, wkseattle revealed the seamy underside of the spelling-industrial complex:
Don't be too impressed with modern young spelling champs. Back in the late 80's when I was in junior high, I participated in the regional spelling bees from which winners went to the national bee (now televised on ESPN). I had the good fortune to qualify 3 years in a row for the regional contest for the greater Philadelphia area and learned the "game."
The game was that you can officially be asked any word from some version of the Merriam-Webster dictionary. So, it's it's impressive when a 12 year old kid spells a crazy word. However... they give all contestants a thin pamphlet of study words for practice. During my first year, my parents overheard that all words in the competition came from the pamphlet (I can confirm this from subsequent competitions). The pamphlet is thin enough that a studious competitor can study and memorize it within a few months. This is how the modern spelling feats are explained in the televised competitions.
I doubt televised spelling bees have any bearing on the current state of U.S. education (my parents' 60+ years of classroom experience suggest a significant decline has indeed occurred).
No wonder these kids are expected to know how to spell terribilita, rhytidome, ochidore, juvia, and stromuhr.
UPDATE: Hold on! Wordboydave has more:
As I understand it, that booklet (which I got back in the late 70s; it may be small, but try memorizing over 1,000 obscure words sometime) only gets you out of the regionals. By Round Two of the official Bee, they've dispensed with the official booklet ("Spell It!"), and by the end, literally any word from Merriam-Webster can be used. So yes, the early stages are sort of manageable — which is nice; everyone's on sort of the same footing — but by the end, you really do need to be really lucky or really psychic.
So I guess you really do have to memorize the entire dictionary after all if you want to play in the big leagues.