What size of letters are you looking for? Here are some applique letters of Pat Sloan. Check out her website, she has great ideas, some awesome tutes, and wonderful free patterns to test out.
http://patsloan.typepad.com/files/pa...bet-shapes.pdf
I bet you could resize them to smaller if you wanted them to be .
Also, Pigma pens are great for writing on the fabric. I use a fine piece of sand paper underneath to write on top of.