There are many quilting options with applique. You can quilt over it, or you can quilt around it.
Whether or not quilting every 2 inches is enough depends on the batting you use. Some battings need to be closely quilted; others can be quilted up to 10 inches apart (although you would probably want to quilt closer than that for a bed quilt that will be washed many times). Check the packaging that came with the batting for recommended distance apart for quilting lines. If recommended spacing is 8 inches and your entire applique word is 6 inches long, you could quilt around the entire word instead of around each letter.
If your letters are half an inch apart, that is enough space to quilt between the letters if you need or want to do that. To make continuous quilting easier, look for the easiest path. For example, you might want to quilt above the first letter, down and midway between the first and second letters, under the second letter, up and midway between the second and third letters, etc. Then start again below the first letter, up and miday between the first and second letters, etc.