This puzzle appeared in Microsoft Intern PuzzleDay 2004, whose theme was urban legends. The puzzle has two pages that look nearly identical. We put both pages in teams' puzzle packets, about ten puzzles apart, without telling them they were two pages of the same puzzle. Teams had to figure this out for themselves.
The last step of this puzzle was originally an unclued anagram, which is now considered bad form. In my defense, I wrote this puzzle before I and the rest of the puzzle community had figured out this important principle in puzzle design.