Hint for future reference: You will see problems like this in technical job interviews. Generally speaking, if you can't do it in place, you don't get the job. Trust me. No offense to those who suggested reversing a copy of the string, but this problem explicitly divides prospective programmers into "people who do that" and "people who don't." Don't even think of using a regexp, as that is a little like being asked how you would change a car tire and answering, "first, I would rent a crane..."
The code robbieduncan posted is on the right track, but solves a slightly different problem than the one described. His solution does not ignore non-letters, but instead matches them against any other non-letter character. They still count. The problem described should count "$$$ab cd.cba3" as a palindrome. This can be done quite easily with an adaptation of robbieduncan's code.