How do I get it to not footnote the 'water' in the 'pail' definition?

By using a single substitution. Something like this (untested)

my $words = join "|" => @wordlist;
$newline =~ s/\b((?:$words)(?:ed|ing|al))\b/\\footnote{$1 $hash{lc($1)
+}{explanation}}/i;   # No /m needed.
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Abigail