I finished my set of fabric letters a few months ago, and they are still a huge hit. We keep them in a large bowl under the couch, and weekly (if not daily!) they are pulled out and played with.
Isaac has begun to ask what everything says (signs, cereal boxes, tags, etc.) It's been fun to write words together with these letters (although I did have to make an extra "a" so that we could write his name!
I used this amazing tutorial, although I just freelanced my letters instead of printing out a font. They were simple to make, but a bit time consuming. All you need is a sewing matching, thread (I used random colors that didn't even match for some fun), scraps of fabric, and quilt batting or felt for in between the front and back of each letter.
If the whole alphabet seems overwhelming, just do the letters of your child's name!