This effect gives a nice three dimensional appearanceto text. The letters look like they have a raised edge with an shadowed,inset interior.  To begin, decide what size you want your letteringto be, and open a file TWICE AS LARGE. Here I wanted my text to be about300-400 pixels wide, so I opened a file that was 800 x 300 pixels. Usea white background, and start with 16 million colors.  The reasonfor the extra size is that the effect looks best if you make the text large,and then resample it down to the size you want. Place some black text usinga nice wide font. Here I used Arial Black. Be sure that theAntialias option is OFF.
 
 

Deselect your text by hitting [Shift N]. Now go to the Image menu,Edge Effects:Trace Contour. You should get just an outline.
 
 

Now we need to widen those borders. Go to the Image menu again, SpecialFilters: Erode. Repeat this process until you get a border size you like.Here I eroded twice.
 
 

Now choose a color you like. I chose blue for my lettering. Usingthe magic wand, select all of the border areas. Remember to hold down theshift key each time you click a new part. Using the flood fill tool, paintthe letters the color of your choice. Be sure to leave the areas selected.
 
 
 

Now we add a bit of depth to the border. Go to the Image menu, SpecialEffects: Cutout. Set the shadow color to white, the opacity to 255, theblur to 5, and the vertical and horizontal offsets to 1.
 
 

Now repeat the last step, but change the shadow color to black, andthe offsets to -1.
 
 
 

Now we are ready to fill in the interior. Using the magic wand, witha tolerance of 50, click on the inside of the first letter. Set your backgroundcolor to white, and leave your foreground color alone. Click on the floodfill tool and select Linear Gradient. In the options menu, set the angleto 135 degrees. Fill in the first letter.
 
 
 

Here's the strange part. To add shadows inside the letter, OVER thegradient, go to the Selections menu: Invert. Then open the Images menu,Special Effects: Drop Shadow. Set the shadow color to black, the opacityto 255, the blur to 20, and the vertical and horizontal offsets to 4.
 
 
 

Deselect the interior of your first letter, and repeat the stepswith each subsequent letter. I know it's tedious, but the results are great.
 
 

The images above were made starting with a 400 x 150 pixel file.For your project, you will need to go to the Image menu:Resample. Set thesize to half of what you started with. Be sure to maintain the aspect ratio. If you actually start with the larger file, the final result (after resampling)looks like this:
 
 

All the little jagged edges are elliminated. To finish, Save as atransparent GIF.