Red crystal stars do NOT count for this. There are 120 total in the game. 40 levels with 3 regular stars each. After you have defeated a level normal, you can hit
to scroll over to the levels other challenges. These is always a time challenge but the 3rd star is different for some levels. Most of the time it just gives enemies more health/damage. Complete all 120 possible challenges to earn this.
If you are stuck or do not mind cheating... use http://wordunscrambler.com/
It will make things go much faster.