(Font: Birch Standard. Elements and background paper from Lynn Grieveson's Catalina kit @ Designer Digitals.)
The part I'm really pleased about is the background (check out how even the stitching actually follows the contours of the cloth!). How'd I do that? Sooooo glad you asked... ;)
I scanned a white t-shirt and made a desaturated image with it. Then, I overlaid Lynn Grieveson's beautiful paper on top and changed the paper layer to an overlay blend. Then I also did a displacement filter (distort-->displace using the t-shirt psd file) on the paper. What this does is actually warp the paper so that it's not only a flat illusion, but the displacement changes the paper so it looks like it goes "down" on the dark areas, and "up" on the light ones; by superimposing the distortion over the grayscale image you get much more of a sense of depth (props to Photoshop 7 Wow! for the technique). I did the same thing with the word art (clipped it to the grayscale background first, though). For the stitching, I only used the displace filter, but I had to go in and clean up with the smudge tool afterwards. The stitching is really cool, though--it "makes" the effect by being so zigzaggy directly on top of the fabric folds... Fun stuff!
The frustrating part is that I still need lots and lots more practice with that darned "curved photo" look. Still looks pretty amateurish to me...