What We'll Be Using:

Corel Paint Shop Pro

SUPPLIES:

Patterns (or you can use your own)
(12 seamless patterns with .jpg extensions which can be placed in your Patterns folder - PSP8 and up support .jpg formats for patterns. Or you can just open in PSP, minimize pattern(s) and you will at the top of the images in your dropdown list. If installed, they'll be found in alphabetical order so mine will be near the bottom).

Fonts Used

More results (with thanks to my dear friend Ginny for testing!) TESTER RESULTS

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1) File/New: 650H, 450W, Background=White.
File/Open and find the .jpg pattern you wish to use (this is only if you did not place it in your Patterns folder).
Dark color for Foreground (mine is #7c0710) and a complementary color for Background (mine is #979800). Now change your Background to Pattern and find your chosen pattern in the dropdown list (mine is wk_seamless-autumn1.jpg: Angle 0, Scale 50). See below.
Make sure your Layer Palette is open, if not, View/Palettes/Layers.
REMEMBER TO SAVE YOUR WORK IN PROGRESS AFTER EACH STEP.

2) Have font Penguin Attack opened (if you didn't install it or place in a Fonts viewer program, just locate it on your hard drive and double click to open, then minimize. You will now be able to find it in your PSP Text Tool's dropdown list). Here are my settings below. Different letters, fonts and/or different sizes will give unique variations.

Type the first letter of your name/word and move it to the left of your canvas.
Right click your mouse on the layer in your Layer Palette and Convert to Raster Layer.
Right click your mouse again and Duplicate the layer.
We want to keep these 2 text layers together and in case we want to reposition them later, we'll use the Layer Link Toggle. Highlight one of the text layers, click on the None, changing it to 1. Highlight the other text layer and also change the None to 1. (Note: If you had other layers in your palette and you wanted to link some of them together you would click the None and you would also see you could now change those to 2. All layers with value 1 would move together; all layers with a value of 2 would move together, etc.). You'll see a symbol that looks like a "chain link" on each layer now. See screenshot below:

3) Hide the top/duplicate layer (click on the "eye" in Layer Palette - this is the Visibility Toggle) then click on the bottom/original text layer to activate it.
Selections/Select All.
Selections/Float.
Selections/Modify/Contract 2.
Effects/Image Effects/Offset. If you right click your mouse on the color box, the Recent Colors Box pops up. You will see that your current Foreground and Background colors are at the bottom. Left click mouse on the bottom color, #979800 and now you can click OK in the Offset window. See Below.

Click OK to apply.
Edit/Repeat Offset - do this twice so you'll have applied this Offset setting a total of 3 times.
Effects/Edge Effects/Enhance.
Selections/Select None.

4) Click on your Magic Wand, settings below:

Click outside of your letter, anywhere on the canvas, then Selections/Invert. Effects/3D Effects/Drop Shadow: Vertical and Horizontal=10; Opacity=20; Blur=10.00; Color=#000000; Shadow on new layer is UNchecked.
(The reason we did the Magic Wand and Invert step first is because the Offsets we applied made a portion of the text transparent. If you just applied the shadow, you would be seeing part of the shadow within the transparent area of the text. This is also true with many text and dingbat fonts that have open/transparent areas.

5) Click on the top/duplicate layer to activate and UNHide it.
Selections/Select All.
Selections/Float.
Selections/Modify/Contract 2.
Effects/3D Effects/Inner Bevel. See screenshot below:

While still selected:
Effects/Image Effects/Offset: Change both values to 3 and apply a total of 3 times.
Effects/Edge Effects/Enhance.
Selections/Select None.

6) Click on your Text Tool and then swap the Foreground and Background in your Material Palette (use those double headed arrows).
Close the Foreground and now your Background should be #7c0710.
Still using Penguin Attack font, but change the size to 125. Type the remainder of your name/word (I typed "utumn"; see sample above).
Selections/Select All.
Selections/Float.
Selections/Modify/Contract: 1.
Effects/3D Effects/Inner Bevel: apply the same bevel as above.
Selections/Select None.
Effects/3D Effects/Drop Shadow: Same as before (but we don't need to do the Magic Wand and Invert step since none of the text has any transparency): Vertical and Horizontal=10; Opacity=20; Blur=10.00; Color=#000000; Shadow on new layer is UNchecked.

7) Click on your Text Tool again then swap your Material Palette colors back, opening the closed color. Foreground: #7c0710, Background #979800 and have the pattern showing (just like when we started). We'll now use the second font, Earwig Factory, that I used for my "2007" text. Note that the numbers and letters for this font will be transparent (stroke color will outline the box and the letters/numbers while your pattern will color the area surrounding the letters/numbers). Settings below:

Note: Depending on the letters you choose, you may want to change the value in the Tracking box. For "2007" I wanted them to slightly touch/overlap. So to move the letters horizontally closer together you use a minus value; for further apart you use a plus value. (If you enter 2 or more lines of text, you would change values in the Leading box which moves them closer or further apart vertically).

While text is still Vector, you can click on the box/rocker arm (see below) to rotate it without causing any distortion (I only lowered opacity on the text so you could easily see the rocker arm).

Once your text is moved into position, Convert to Raster Layer.

8) Selections/Select All.
Selections/Float.
Selections/Modify/Contract: 2.
Effects/Edge Effects/Dilate (dilate subtly enhances the light colors of the image).
Selections/Select None.
Click on your Magic Wand and then click on any area outside of the text.
Selections/Invert.
Effects/3D Effects/Drop Shadow: Vertical and Horizontal=2; Opacity=30; Blur=5.00; Color=#000000, Black; Shadow on new layer is UNchecked.
Selections/Select None.

9) For the "colors" text I changed the Pattern to wk_seamless-autumn2.jpg (Angle 0, Scale 50), Foreground is still #7c0710.
Earwig Factory size = 72.
Stroke Width = 1.
Tracking = -0.100.
Type your name/word.
Move into position and Convert to Raster Layer.
Selections/Select All.
Selections/Float.
Selections/Modify/Contract: 1.
Effects/Edge Effects/Dilate.
Selections/Select None.
Click on your Magic Wand and then click on any area outside of the text.
Selections/Invert.
Effects/3D Effects/Drop Shadow: Vertical and Horizontal=2; Opacity=30; Blur=5.00; Color=#000000, Black; Shadow on new layer is UNchecked.
Selections/Select None.

10) In your Layer Palette, click on the bottom (Background) layer to activate.
Layers/New Raster Layer.
Change your Pattern back to wk_seamless-autumn1.jpg but also change the Scale to 100.
Click on your Airbrush Tool. You'll be using your right mouse button to paint the pattern since it's your Background style (or if you're more comfortable painting with the Foreground, just swap materials so your pattern is the Foreground - your choice). Paint across your working canvas making sure the brush outline does not extend over the edges (you don't want hard edge lines on your finished tag). If you like deeper color, apply several times, as our Opacity is set low. See Airbrush settings below:

After I finished painting I added Effects/Edge Effects/Enhance. Depending on pattern you're using you may want to skip that effect.

11) Hide bottom (Background), white layer.
Click on your Selection Tool then the Merged Opaque icon (see screenshot below). This will put a marquee around your other layers.

Image/Crop to Selection (this removes the excess white background, making our tag smaller). Our separate layers are still intact if we want to reuse later.
UNHide your Background layer after cropping.

12) All you need to do now is add your watermark or if you don't have a watermark, just add your "created by yourname/nickname" line somewhere with a smaller size text/font. Your new tag is done.
File/Export/JPEG Optimizer to save your work to show your friends (smiles). Here are the settings I normally use:

* Below with just initials, size 250. I entered each letter separately so I could move the K down, then closed my background and merged/visible before duplicating the layer in Step 2: