Carmela made this set of layouts. I made one like it years ago, so while I'm not sure how she did it, I can tell you how I did.
First I cut out my letters on white cardstock. I made sure they could fit on my pages the way I wanted them to before I attached any pictures to them.
Then I got out all of my pictures. I chose the ones I wanted to highlight and put them on the top and in the middle of the layout. I filled in the pictures on the cardstock letters, making sure the parts of the pictures that were the most important were completely ON the cardstock letters. Once I filled up the letters with my pictures, completely covering all the cardstock, I cut off all of the excess photo pieces. (That's why it's important to make sure the the parts of the pictures you want the most are COMPLETELY on the cardstock.) After cutting out the letters just the way I wanted them, I matted the letters on another piece of cardstock, a LITTLE bigger than the photo letters. To do this, I adhered the photo letters to a piece of cardstock, then trimmed around the letters about an 8th of an inch from the photo letters, to make a border.