#!/usr/bin/perl -l

# http://perlmonks.org/?node_id=1178025

use strict;
use warnings;

while(<DATA>)
  {
  my ($want, $in) = split;
  my $pat = $want =~ s/\B/?.?/gr . '?';
  #print $pat;
  my (@answers, %found);
  $in =~ /$pat(?{$found{$&}++ or $answers[length $&] .= "$& "})(*FAIL)
+/;
  print "$want in $in is ", @answers ? $answers[-1] : 'not found';
  }

__DATA__
ABC DFGABCKBG
ABC DFGAXBHCY
ABC DFGAXBHY
[download]

Many more test cases are needed :)

Also an explanation of why ABC DFGAXBHY should be AXB instead of AXBH

Also what should be done if there is more than one "longest".

Also, can there be more than one extra character between wanted chars, and if so, how many?