There are different methods. I print out the wording on paper from a chosen font, then use an exacto blade to score around the edge of the letters. I then use a dremel tool to actually rout out the script. Some folks use hot tools like wood burners to burn out the letters and some carve them all by hand. Depends on what method works best for you.
I did the same. Type up whatever you want and print it in Landscape. You can usually use 2 pages one atop another. I used a dremel routig bit. Oh, and if you want an aged- slightly chipped look you can spray the edges with spraypaint. It will eat the styrofoam and look more like stone.