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because let expression will be substituted as lambda expression, every lambda expression will extend the environment.
the new environment is confined to the let expression, it doesn't change the outer environment.
Do away with the let - All the (define var '*unassigned*) which was there in the let statements should instead be moved on top of the body. The set! statements should simply replace the earlier defines.
Note that you cannot simply, move all defines to the start of the body, because that might allow the body to access variables not yet defined in the original code.