I'll start with the cutters. There are 3 main types of cutters, V "engraving cutter, round cutter and one of them:
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Most of the signs i make I use the round cutters. I hardly use the specialist lettering cutter simply because they are rather large and most of my signs are smaller "home" type signs.
The V shape cutters are more difficult to control than the round cutters. If you wooble a bit with a V cutter it's much more difficult to correct the edges of the cuts, and you end up having multiple grooves at the bottom of the cuts. The round one are much more forgiving and easier to correct a wobbly edge with.
You need to choose your type of font to suit the rounded look of the letters, I think the router is better suited to "informal scripts such as
Bradley hand font, something with parallel edges to the letters. Also bear in mind you can't have square end finish to your letters, unless you use chisels to finish the letters by hand.
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It is possible to router carve more elaborate lettering but the letters need to be bigger to allow multiple passes with the cutters. Even old English is possible with all the flourishes but its difficult to do with smaller letters.
When I use round bottom cutters, the depth of the cuts generally will be the radius of the cutter I use: ie for a 6mm cutter the depth of cut will be 3mm and so on.The size of cutter depends on the size of the sign that's wanted.
I normally pre-adjust the depth of cut and lift the router as needed, much easier than trying to use the plunge and follow the markings at the same time!
I use a small light router rather than a heavier machine. I found it easier although they are more sensitive to the cutter catching and following the grain than the heavier machine would be.
As to carving Celtic ropework, I have tried a couple of times, but only only a small scale, the groove becomes the rope of the ropework if that makes sense? I'll see if I still got it and take a pic.
If you wanted a raised ropework, you could use the router to lower the background leaving the ropework raised, but I think you would have to finish the carving with hand tools. I think I would be easier and possibly quicker with chisels than a Dremel, although I haven't tried.
I teach woodwork to people with brain injuries and because some of my clients are partially paralysed, I have bought an Bosch PSE 180E Power Carver/Scraper. It's Ok, and enables clients to do some carving that they could not do otherwise, but I don't find them as good or as fast as some good hand chisel.
And the thing is darn noisy! I have tried to use the thing one handed so that I could get some ideas of how to teach my clients and it's not easy.
You need to draw the patterns you want to carve on the wood before you can carve. I use of mix of computer drawings, free hand and a book on lettering. Getting the artwork right genrally takes more time than actually doing the carving, and it's worth spending the time to get it right on paper and transfering it to the workpiece.
I have built a small table which is quite high so that I can work standing, it need to be large enough so that you can rest you forearm and elbows as well as your bit of of wood, I find it easier to control the router is my arms are resting on the table.
I hope this rambling is going to be helpful. Just ask if you need more info.