Most of the cards I have seen using this technique stamp the image first (as I have done on this one) and then cut out the letters using the Stampin' Up! Large Letters cutting dies. There were a few that cut the letters out, left them in place and then stamped the images over top. I have seen others where the letters were cut from the stamped card stock and then several other layers of the letters were cut from plain cardstock. All of the layers were then carefully glued together for thicker letters and placed on the card front.
Here's my version of Sandi's card.
Stamps - Happy Birthday Gorgeous
Ink - Rich Razzleberry, Rose Red, Old Olive, Versamark
Card Stock - Rose Red, Basic Black, Whisper White
Other - Large Letters dies, Stampin' Dimensionals, Rhinestones, Rose Red Seam Binding (retired)