To cut out the center of letters with no opening, I used a drill to make two holes close together, wide enough for the blade to fit into. Smaller areas can be harder to cut as you go along because as the cut pieces of cover and pages become loose there is no way to hold them together and they vibrate. Using a clamp might help in some cases, but with the hand-held saw you would have to keep moving the clamp as you cut. I can see how a band saw with a flat work surface to cut on would be easier and probably give a neater finish. Sometime I'd like to try one, but this method worked pretty well too.
I was able to find books for as low as 25 cents at thrift stores. It is kind of hard to cut up old books, but when there are soooo many, you soon see it as re-using them in a new way. These can make a fun gift, especially if you fit the book title/subject to the person you are making the letter for. (This Latin Composition book went to a friend who is trying to conquer Latin at college. She actually seemed to enjoy the thought of damaging a Latin Composition book!)I posted these on http://www.creativejewishmom.com/2013/01/welcome.html and http://www.craftberrybush.com/2013/01/welcome-to-our-new-linky-party.html .