The instructions from the Azed are "From the answer to each clue the solver must omit one letter wherever it occurs (often more than once) before entry in the diagram. Definitions in the clues refer to the full, unmutilated answers; subsidiary indications, such as anagrams etc, refer to the mutilated forms to be entered in the diagram. Numbers in brackets show the full length of unmutilated answers."
If I understand the Azed correctly, the 5 letter 'word' NESIT doesn't need to exist. NESIOT must exist (and does!). GRM's explanation is NESIOT (Indonesian) - O = NE (old term for negate/say no) + SIT (fit). The omitted 'o', in this case does not stand for the abbreviation for 'old'.