When my son was learning to read at about age 3, I went to a stationary store and got some large letters for teachers. Made of cardboard, very sturdy. Used them to print out the alphabet and all the letters always found together...QU..TH..OO, etc and marked them on 2 inch wood. DH and I cut them out and son "helped" decorate them after we had used non-toxic paint on them.
I found several sizes of these, up to about 6 inches or so tall. These could be used to mark fabric, and/or the fusible ironed to that fabric. They can be turned easily on back for marking on the fusible.