Are the marks from the bit at the location that you plunged it in? My first guess would be that the force of plunging the bit in is also flexing the lettering kit. I don't know how the lettering kit is made but some seem to have bars that hold the letters and if these are not supported then they would flex as you push down then as you start moving the pressure lets up and you are left with the marks.
I would pick one of the letters and shim the kit near the letter and go another 1/32 deeper and see if it clears up. Also a bit that has a round nose wouldn't show the problem as much.
The last issue is one that some people miss when picking bits for plunge operations. By looking at the marks it looks like you have a bit that is not designed for plunge cutting. You should get a bit designed to do plunge work, either a spiral or a plunging straight bit. The bit you are using does not have a cutting edge on the bottom and only marginally works for what you are doing.
Ed
I would pick one of the letters and shim the kit near the letter and go another 1/32 deeper and see if it clears up. Also a bit that has a round nose wouldn't show the problem as much.
The last issue is one that some people miss when picking bits for plunge operations. By looking at the marks it looks like you have a bit that is not designed for plunge cutting. You should get a bit designed to do plunge work, either a spiral or a plunging straight bit. The bit you are using does not have a cutting edge on the bottom and only marginally works for what you are doing.
Ed