• Copy the text from Word
• Open your PS file and draw a text box with the text tool wherever you want it
• Paste the text in and format it with the character palette
• Double click on the text layer to add layer effects
• Kick back and relax

If you have CS2, hopefully you'll have Indesign. Set your type in Indesign. You can do just as many neat things with type in Indy as you can in PSD.
If you're printing this at home or don't intend to use a commercial printer, you're fine.
But if you plan on taking this out to be printed, please don't use PSD for setting your type! It will rasterize and it will be ugly.
Plus, due to the fact that you're even considering this, your type (if black) will be set as a 4-color build with a build percentage of 300%. Your printer will kill you. I had to kill somebody yesterday. HA! See if he ever does THAT again!
If you MUST set your type in PSD, make sure the black color that you use for the type is 100% Black.

rickself - it is going to a printer and I do have CS2 InDesign.

this 'rasterize' business sounds bad... but the text in this case is not black.

let's say I set the type layer in Indy what do I then do with it? What I mean is do I import the graphic into Indy or the type into PS?

thanks teej: I'm going to kick back on it today!

If you want to create and format the text in InDesign, which you should if you want the best quality text achievable, then you would import the image into your InDesign document (.psd, .tiff, .eps, etc.) and then format the text in that. You need to do this for all the pages of your book and then when it's ready to print you can either provide the printer with a press-ready pdf or in this case I would recommend giving the printer all the files which you can collect together from InDesign by using "Package..." from the file menu. If you do this then it allows the printer to make any necessary adjustments which can be difficult or impossible from a pdf.

Bear in mind that when you're laying out your book in InDesign which you would do as spreads (two pages side by side) you can literally put them together as you would see them when you open the book. The printer will then impose them into the way they need to be to form a perfect bound book ie page 1 next to 16, 15 next to 2, etc.

Hope this helps

my only concern is that Indy says: converting to JPEG when it imports the PSD file: I am worried that I am losing quality...?

Also I am having real problems with page size: canvas size in PS = document size in Indy but then when I do the import=place function the PSD appears smaller!!

It says "Converting to JPG" because it creates a JPG preview of the PSD file in InDesign. Your original file will be untouched.

And the rasterization business is bad, even if the text isn't black.

Place your PSD (without the text) into InDesign. Import the text into InDesign.

When you talk about adding a shadow to the text, I really hope that you're not talking about doing this with anything smaller than 18 or 24 point type, or with anything that isn't a headline. If you're formatting body copy and it crosses over areas of the Photoshop background where it becomes unreadable, then you need to change what's behind the text so that it will be readable. You can do this by creating an area of solid color as a background, or screen back the background where the text will appear in Photoshop.

I wish Adobe would take all of the type formatting tools out of Photoshop so that people wouldn't format text in that application.

GOOD IDEA!
Hello, Adobe!?!?

OK - spent hours yesterday playing around and Photoshop is definately having huge probelms with the text (all jagged looking) so it is going into Indy for sure.

A couple of questions:

Does Indy add the bleed onto (on top of) the document size rather than taking a piece out of the document size? so I just tell it standard A4 plus 3mm bleed and it increases the size automatically (all my PSDs are 216x303mm)

How does Indy 'know' that the image resolution is 300dpi? do I need to set that myself or does it get it from the PSDs?

When I place a word doc no new 'link' appears. are these 'links' important?

Oh - thanks for the tip BlackKnight - I was going to add a very fine 0.1mm drop shadow to 9.5pt text but I guess that won't print too well?

InDesign adds the bleed to the outside of a document. To adjust your bleed settings, go to File --> Document Setup. If you don't see your bleed settings, click on "More Options," and that will give you your bleed and slug settings. Don't worry about what slugs are, they're irrelevant to you for the moment.

InDesign just uses the resolution of the Photoshop files. It won't change the resolution of these files, unless you change the resolution if you export it as a PDF.

The "Links" are the files that you place into your InDesign document. If you place a PSD or Illustrator file, it will show up as a link. By default, InDesign uses links to files, instead of embedding them in the document; when you send the document to a printer or to be worked on by someone else, these links need to be with the InDesign document. This is standard for layout programs. So yes, links are absolutely vital.

The reason that your placed text isn't showing up as a link is because InDesign doesn't create links to text files by default. You can change this in the preferences, but I don't recommend it; if you create a link to a Word file, format the text in InDesign, then make a change to the text in the Word file, you lose all of the formatting that you did in InDesign, and you have to start over. In general, it's best to just not link to text files.

And no, a drop shadow on body copy is not a good idea. Also, use effects like drop shadows sparingly, even on larger type; using them too much causes them to lose their impact. In my personal design, I try not to use them at all.

Hey BlackKnight I just want to say thanks to you - when I first read your first reply I thought 'this guy is crazy if he thinks I'm gunna mess around with the image JUST for the text!' - but everything else sucked and I finally altered the images in Photoshop then reimported them into Indy and now my text editing is breeze! Cool man... no drop shadows, all text editing in Indy - musch better than a few days ago so thanks..

You're welcome, TTHacken!