For this image I decided to use text from Winnie-the-Pooh to form the word Heffalump...
1.) A brand new 800 by 300 pixel image.
2.) Starting with the leters in the middle, and the text tool. Use a nice fat font, pretty big, so that it actually shows up later on. Notice how I used a negative line spacing to get the two lines closer together.
3.) Then the H and the P. Increase the font size to match the total height of the two lines. If your spaces don't work out the way mine did, use the text tool twice, a seperate time for each letter.
4.) Let's get all of the text into one layer, so we can do stuff with it later. However, it's always good to save the original so you can come back and edit if need be. So create a new transparent layer to hold all of them, then duplicate both (or all three) text layers and move them to the top. From there, use "merge down" to merge them into the layer you created.
5.) Hide all the layers so far for this part, except for the white background. Create a new transparent layer to hold the text.
6.) I decided to use text from Chapter 5 of Winnie-the-Pooh, in which Piglet meets a Heffalump. Copy the text you want to use, and open up the text tool, clicking right on the top left corner of the image. Very important: the first thing you should do is decrease the font size, because if you paste text in at a huge font size, GIMP will freeze for a few minutes while it renders all of it. Pick a simple font, then paste.
7.) Unfortunately there's no easy way to do this that I know of. To get continuous text across the whole image, I first got rid of all the line breaks in the text, and then inserted one everywhere that the text went off the screen. When you do this, don't put a break before a word that still appears on the right side of the image, because this will leave wierd gaps in the final image. In other words, if even just a few pixels of a word still fits in the image, leave it there and wrap the next word. Notice how I can change the width of the text input box to match the approximate width of one line of text on the image. If you run out of text, just add some more, and if you have too much, cut out the extra. If you think it looks better, I used a line spacing of -1.0 pixels to get everything less spread out.
8.) In a new layer, render some colorful plasma. 15-pixel Gaussian blur to get rid of the edges, and duplicate the layer.
9.) Duplicate the text layer with the story in it, and merge it into the layer that you created for it. Hide the original. Then right click on the layer with the story merged into it, and choose "alpha to selection". This selects all the pixels with any color in that layer. In this case, that's the letters of the story that we want.
10.) Switch back to the colored text layer, and invert the selection. Now everything that's not part of a letter is selected. Clear that, to leave color just where the original story was. You can see the fruit of your labour if you select none and hide the layer with colors everywhere.
11.) Duplicate one more time this newest layer, with the colored words. Do the same thing you did with the words of the story, except this time with the layer containing the word Heffalump.
12.) That's really all that's left. I did a 1-pixel Gaussian blur on all the layers containing words to get rid of hard edges, and a 4-pixel Gaussian blur on the big black Heffalump layer. Here's the order that the layers go in. I used 5.0% opacity for "Text", 25.0% for "Colors", 15.0% for "Colored text", and of course 100.0% for "Heffalump".
13.) I decided to make a 3-pixel fading border similar to the one on the lighthouse image, simply to make it look better on a white webpage. Make a new white layer for the border, select all, and shrink the selection by a few pixels.
14.) Convert the selection to a quickmask, blur the mask, and convert it back to a selection. Then clear the selection.
15.) My finished image, an image of the layers, and my final result as a GIMP XCF file.