Not easy, but it can be done. You'll need to first create the "smaller-word"
object as a picture and save it in a graphics format (more on that later).
Then you'll need to use it as "fill" for your large WordArt word.

It's probably a good idea to create the large word first and get it just the
way you want it. When you have done so, use the Format WordArt button on the
WordArt toolbar to open the Format WordArt dialog. On the Size tab, make a
note of the size of the WordArt object; that's the size your "fill" picture
will need to be.

In another document, create your "fill" as another WordArt object. Tweak it
until it's just the same size as the first one. Save the document as a Web
page, and the WordArt object will be saved out as a separate graphic (see
http://www.gmayor.com/extract_images_from_word.htm). Word should save the
object as a GIF but will ore likely save it as JPEG. You may want to rename
this and copy it to My Pictures or another picture folder.

Returning to your original big word, open the Format WordArt dialog again.
On the Colors and Lines tab, click the arrow beside Color under Fill and
choose Fill Effects... Select the Picture tab, then browse to find your
picture and insert it as fill.

Create your big word first using the very first WordArt option. Set text
wrapping to 'Behind text'

Create your little words using the third WordArt option and set text
wrapping to 'In front of text. Bend the little words to fit inside the big
word

See

http://homepages.tesco.net/keithhowell/500dwp25.htm