Only the words you wish to change, anything not in your custom dictionary will default back to the standard dictionary. That dictionary will be saved as part of the current song project, not used for further projects unless you copy it over (this allows a project to have special words without messing future work up).
Note that capital letters are differentiated from lower case, a dictionary entry for “Two” will not be used for “two” or “TWO”.
Dictionaries For Newbies is an example of changing one word into a phrase using the dictionary.
Script - To Language Phoneme (Customizable) might be worth a look at to push pronunciation even further.