Dictionary.com also effectively scores it in favor of Governor Palin:
There are a few ways to look at Sarah Palin’s use of “refudiate.” It’s clear that refute and repudiate are lurking in the background somewhere. One view is that it’s a non-word and sets a bad example for students of the English language. Palin’s response:
“‘Refudiate,’ ‘misunderestimate,’ ‘wee-wee’d up.’ English is a living language. Shakespeare liked to coin new words too. Got to celebrate it!”
“Misunderestimate” is a famous coinage by former President George W. Bush. “Wee-wee’d up” is a lexical creation by President Barack Obama.
Say what you will about her invocation of Shakespeare, but Palin raises a classic debate among linguists and lexicographers (people who create dictionaries). Dictionaries have always faced the dilemma whether to be prescriptive or descriptive. Is it the job of a dictionary to direct how words should be used, spelled, or pronounced, or should a dictionary simply document the current usage of the language?
When Palin, Bush and Obama coined their respective terms, they added neologisms (new words) to the messy, changing phenomenon we agree to call English. Whether a word transforms from a novelty into a standard part of our lexicon is a mysterious joy beyond the power of any politician, editor or individual to predict.