... I believe that you are looking to create a clipping mask.
Simply substitute the font in place of a geometric shape.
hello, I'm trying to remember how to do a cool effect using illustrator...check out the example...
the effect allows you to move the text around with some of the letters inside the box, and only the parts of the text inside the box will have the color of the background, even if a letter is half way in.
I'm using illustrator CS3, but i know that works in cs2 too.