1064 error in CREATE TABLE … TYPE=MYISAM

As documented under CREATE TABLE Syntax:

Note
The older TYPE option was synonymous with ENGINE. TYPE was deprecated in MySQL 4.0 and removed in MySQL 5.5. When upgrading to MySQL 5.5 or later, you must convert existing applications that rely on TYPE to use ENGINE instead.

Therefore, you want:

CREATE TABLE dave_bannedwords(
  id   INT(11)     NOT NULL AUTO_INCREMENT,
  word VARCHAR(60) NOT NULL DEFAULT '',
  PRIMARY KEY (id),
  KEY id(id) -- this is superfluous in the presence of your PK, ergo unnecessary
) ENGINE = MyISAM ;