Wow, that's a lot of thought there. I think, however, that my "alogrithm" is pretty much the same.

One thing I'd add about my own usage of words vs. letters is understandability. I think F-A-Q is a good example. "FAK" is shorter and doesn't sound silly to me, but I'd never be sure if people understood what I was talking about- especially the people I need to direct there!