"Just don't take it too seriously; if you do, your punishment is to learn 850 words of any actual foreign language and be set down in a city of monolingual speakers of that language."
Well, I took him up on this challenge...
I took a list of 100 words: the core vocabulary of root words from my conlang, Latha - designed to allow the construction of the most comprehensive set of compound words possible. I translated them into Spanish. I added a few essential words and phrases: 'hola', 'ciao', 'for favor', 'gracias, and 'disculpe' (which I suggest everyone learns before entering any country). I learned two phrases that would help me avoid having to deal with tenses: 'en el pasado' and 'en el futuro'. I dealt with moods similarly: 'puede' for 'can/could' and 'necesita' for 'need to/must'. I only learned one form of each word (for verbs, the 3p present). I also knew to add '-s' for plurals, but that was it.
Then I went to live in a small village in the Peruvian Amazon for about 10 weeks, where everyone speaks Spanish and the only English speakers I met were three foreign residents, one local boy and tourists passing through. Here's what happened:
I found that I could communicate adequately from day one.
If I didn't know the word for something, I made up a compound, and I was understood - and was often told the Spanish word as well, which was a bonus. I also found it handy sometimes to pick an English word of Latin origin, and say it as if it were Spanish, although I guess that's cheating in terms of the challenge. The locals immediately understood that I was not inflecting any words - and this caused hilarity, but not incomprehension (because I always used a pronoun). The hilarity at hearing Spanish spoken this way helped, because talking with me became a favourite village sport, and some of them even enjoyed copying the way I spoke.
I quickly picked up the personal verb endings -o, -as, -amos, -an without really thinking about it. I also found it helpful to learn '-ando' for the present participle ('-ing'), '-ado' for past participle ('-ed'), and the present tense of 'to be': estoy, estas, esta, estamos, estan. Syntax didn't matter much - nobody cared if I said 'estupido gringo' or 'gringo estupido' - the fact that I gave myself this nickname did win me a few friends though.
The main problem I had was that locals would assume from the fluency of my communication that I knew a lot more words than I did, and would use vocabulary that I didn't know - I solved this by saying "disculpe, yo no tiene mucho palabras" ("sorry, I no has much words") whenever I spoke to new person.
By the time I left, my vocabulary had risen to about 200-300 words (including the Latinate 'cheat' words I had incorporated). I had picked up some of the inflectional grammar, without really trying. This was mostly useful for understanding others; I didn't really need to use it myself. I was conversing with ease about environmental issues, politics and philosophy. The local people were amazed, and I was asked to teach English at the local school using my system. Alas, I had to leave.
I conclude that it is indeed possible to communicate using only a few hundred carefully chosen words, and very little else. In fact, it's really easy. It's an extremely fast way to start learning a foreign language.
I also conclude that, while inflections are concise, the meanings within an inflected word can be 'exploded' into separate words. The result takes longer to say, but is equally clear if done well, if not clearer.
What we lose is correctness, we gain in hilarity - and in the all-important opportunity to communicate.