I think people do sometimes. More so in writing, than in conversation. But, it’s too meta. If you’re just trying to have a conversation and someone interrupts you to say, “Hey, great use of that word!”, that’s probably not what you were trying to convey and is distracting. I suggest saving that for word games.

One thing you could do is to ask what a word means. Most people are happy to explain that, and would take it as a compliment of sorts, without getting miffed.