my favorite way to read characters from a file is by using a list comprehension like so:
f=open(textfile, 'r')
while 1:
line=f.readline().strip() #this gets rid of the newline character
if line=='':# if there are no more lines, quit looping
f.close()
break
characters=[line[i] for i in range(len(line))] this splits up every character of the line into its own item in a list. NOTE THIS WILL INCLUDE SPACES AND PUNCTUATION
As for using those characters as variable names, I think you may want to try a dictionary. for every character you read from the file, assign that value as a key in a dictionary like this
tempdict=dict()
f=open(textfile, 'r')
while 1:
x=f.readline().strip()
if x=='':
f.close()
break
x=[x[i] for i in range(len(x))]
for node in x:
tempdict[node]=''
now you can call up each one of those characters by calling
tempdict[charactername]
and either assigning a value or retrieving a value.
UPDATE
characterslist=[]
f=open('putyourtextfilenamehere','r')
while 1:
x=f.readline().strip()
if x=='':
f.close()
break
x=[x[i] for i in range(len(x))]
for j in x:
characterslist.append(j)
that should read each line and save the characters into a list called characterslist