When does something become a word?

At Stammtisch, the German language conversation group, we were discussing the size of something. In German, adding -chen to a word makes it a diminutive. So, Hund=dog, Hundschen=puppy or possibly, used jokingly, one of those itty-bitty yippy dogs.

The discussion in German involved a town the rest of the group had never heard of. The speaker tried explaining it was not a city, and not even a small town, but a village (Dorf). She then said she was hesitant to even call it a Dorf. I suggested that it was a Dorfschen. Everyone laughed (my goal). I thought of Big Isaac, which was apparently the size she meant. Not even a Dairy Queen.

No one could find the word in a dictionary. It wasn't in the monster-sized on-line dictionary. I had never heard the word from anyone else. After all, everyone listening knew perfectly well what I meant. Even in another context, they would have. I'm pretty sure a German would have understood, although she might not have found it amusing.

When does something become a "real" word? Is Dorfschen a word? In the absence of other knowledge, I figured this was akin to Mr.STFU's use of 'fucktard'. I'd never heard it before, but immediately understood his meaning. [of course, I have since seen it other places, so either it was already a 'real' word, or else my brother has had a huge impact on the English language.]

I'm thinking of submitting it to the German equivalent of the OED. (Being such an orderly culture, they must have one.) Maybe they'll like it.