A: 

use google's spellchecker

http://www.asp101.com/articles/jeremy/googlespell/default.asp

StingyJack
+2  A: 

You can do this using a RichTextBox control, which will allow you to set the underline style and underline color on any portion of text.

And here's an example doing exactly what you want to do.

Ryan
A: 

This page shows how to owner-draw a TextBox to draw the wavy red line.

Loris