When asked to create an ornamental type illustration, I had a vision of horrid cheap club flyers and MySpace graphics. So, my first advice is to put away your ornamental dingbats and EPS libraries and start your custom type from scratch.
In this project, I'll show you how, with preparation and planning, a word can be manipulated to interact within itself ornamentally. Here you can see the finished design, and over the page I'll walk you through the process. These ideas will help and inspire you to start creating your own type illustration, without the use of Photoshop filters to twist your words and add flourishes.
Inspiration and patience are the main ingredients needed. So, before you begin, get down to the library and read some design annuals from 1960-1984. Also check out some typography pools on Flickr to see what other designers have been creating.