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Level 3 - LIYLOTCA
The answer to this puzzle is:
Words: COITALLY, LACILY, COITAL, ALIYOT, CITOLA, COALY, COLLY, OCTAL, LYTIC, TALLY, OCTYL, TOLYL, ALLOT, LOTIC, LAITY, TICAL, TALC, LILO, OTIC, TALI, IOTA, LOTI, ILLY, LILT, ACYL, LOCI, LATI, CALO, ALIT, COLY, CLOY, LAIC, YILL, TOIL, LOCA, CIAO, TAIL, TACO, CITY, LACY, TILL, OILY, TOLL, TALL, COLA, ALLY, COIL, ALTO, TIL, ALL, OIL, ACT, COT, LOT, LIT, LAY, TOY, ILL, ALT, LAC, TIC, ICY, COL, LAT, AIL, COY, OAT, CAT
Bonus words:
COITALLY, LACILY, COITAL, ALIYOT, CITOLA, COALY, COLLY, OCTAL, LYTIC, TALLY, OCTYL, TOLYL, ALLOT, LOTIC, LAITY, TICAL, TALC, LILO, OTIC, TALI, IOTA, LOTI, ILLY, LILT, ACYL, LOCI, LATI, CALO, ALIT, COLY, CLOY, LAIC, YILL, TOIL, LOCA, CIAO, TAIL, TACO, CITY, LACY, TILL, OILY, TOLL, TALL, COLA, ALLY, COIL, ALTO, TIL, ALL, OIL, ACT, COT, LOT, LIT, LAY, TOY, ILL, ALT, LAC, TIC, ICY, COL, LAT, AIL, COY, OAT, CAT