Carol Ann Tomlinson provides an example of a 6th grade class differentiating a spelling activity (p. 52). Students are pretested and given words at the apropriate level. These color coded levels are then the basis for their work with spelling words. Students do a variety of excercises to learn the spelling words and are tested. Any words that are misspelled are added to the new list. In this way students are continually challenged at an appropriate level.
How does this compare with the spelling programs at your grade level? Is every student on the same page of lists? How do you account for individual differences in ability?