The loop 287-290 (Ile, Phe, Arg, and Phe) of the protein acetylcholinesterase (AChE) changes its structure upon interaction of AChE with diisopropylphosphorofluoridate (DFP). Reversible dissociation measurements suggest that the free-energy (F) penalty for the loop displacement is DeltaF=Ffree-Fbound approximately -4 kcal/mol. Therefore, this loop has been the target of two studies by Olson's group for testing the efficiency of procedures for calculating F. In this paper, we test for the first time the performance of our "hypothetical scanning molecular dynamics" (HSMD) method and the validity of the related modeling for a loop with bulky side chains in explicit water. Thus, we consider only atoms of the protein that are the closest to the loop (they constitute the "template"), where the rest of the atoms are ignored. The template's atoms are fixed in the X-ray coordinates of the free protein, and the loop is capped with a sphere of TIP3P water molecules; also, the X-ray structure of the bound loop is attached to the free template. We carry out two separate MD simulations starting from the free and bound X-ray structures, where only the atoms of the loop and water are allowed to move while the template-water and template-loop (AMBER) interactions are considered. The absolute Ffree and Fbound (of the loop and water) are calculated from the corresponding trajectories. A main objective of this paper is to assess the reliability of this model, and for this several template sizes are studied capped with 80-220 water molecules. We find that consistent results for the free energy (which also agree with the experimental data above) require a template larger than a minimal size and a number of water molecules approximately equal to the experimental density of bulk water. For example, we obtain DeltaFtotal=DeltaFwater+DeltaFloop=-3.1+/-2.5 and -3.6+/-4 kcal/mol for a template consisting of 944 atoms and a sphere containing 160 and 180 waters, respectively. Our calculations demonstrate the important contribution of water to the total free energy. Namely, for water densities close to the experimental value, DeltaFwater is always negative leading thereby to a negative DeltaFtotal (while DeltaFloop is always positive). Also, the contribution of the water entropy TDeltaSwater to DeltaFtotal is significant. Various aspects related to the efficiency of HSMD are tested and improved, and plans for future studies are discussed.