I have had extreamly good luck with this method of making signs,,, I just use a very small trim router with a solid carbide 1/4 "ball nose" end mill in it,,, I use that because it gives me a radius at the base of the letters or picture you are making in the sign. If you wanted a sharp corner ,,, use a flat bottom bit.
I replaced the base of the router with a piece of 1/4 inch plexiglass that is about a foot square to give it a large foot print, and drilled a hole on two opposing sides and mounted a couple of dowels for handles to guide the router. All routing is done free hand .
To get the design on the wood, there are several methods. One is to use the computer. I just go to some word program and find the type of Font that I want for my sign and then type out what I want it to say and print up what ever I end up with that pleases me. Once I have a hard copy in my hands,,, ( If I cannot get it to print up large enough out of my printer on the computer,,, I take it to a copy machnine that enlarges or take it to a copy shop like "KinKo's" and they can make it as large as you want it,
Then take your final copy and lay it on the wood and under it,, lay some carbon paper and run a pencil over your sign so the imprint will press down through the carbon paper and when you are done,,, remove your copy and carbon paper and you now should have the outline of your sign transfered to your wood and ready to start to rout out what you do not want. Either rout out the letters or rout out the surrounding spaces and leave the letters standing high,,, I like that look best myself
Another method I use, and get great results, is to use an "Opaque Projector". You just place your subject under the projector and shine it on the wood sign you are going to make and then take a pencil and outline the picture that is now being shown on your slab of wood. This is a secret of artist and sign painters that they never tell you about,,, I learned it when I took some air brush classes and was amazed when I tried it,,,,, with that projector,,, you can paint ANYTHING !!!,,,, and that also goes now for signs, now that I have tried it on wood,, It works fantastic and you are not stuck making the same kind of lettering when you have to use those letter templates.
Once you try either of these methods and see what you can now produce,,, for free !! you will probably collect all your templates and take them to the curb for the next trash day. Really.
This may sound a bit complicated but if you try it,, you will see there's nothing to it,,, and you will blow your friends minds,,, as long as you do not tell them or show them the secret of how you did it.
I have tried to send in a couple of pictures so you can see them,,, but so far,, have not had luck in getting them through,,,,
But I will be happy to answer any questions that I can.