Meanwhile, you may want to check out Corinne's brilliant Tips for Teeny Tiny Text. While I don't use a computer font when I embroider text (preferring as I do the "handwritten" look--ahem), you may want to go this route. And even if you don't, the tips are useful for words-type embroidery.
And in that photo up there? My first time using the tiny version of the oval hoop, and I decided to do wee neighbors in a garden. If you wanted to make something similar, I think it would be quite simple to modify my pink house tutorial--let me know if you try!