totaly depends on the CNCs ability I do 2mm steps solid carbide cutter 6mm dia and quite a fast feed rate , this way you dont need a huge power spindel , when cutting MDF you shouldent get fine powder dust should be almost like a wood shaveing cutting too slowly will cause the cutter to gum up turn black and blunt quickly .
I have cut letters in two 3 mm steps for 6mm mdf but it makes the roughter cutter howel like a dog , by the way a cutter making an unhappy noise means you are doing some thing wrong! eather feed rate or RPM . I also leave about .2 or less so you dont have to worry about holding all the letters , it cleans off dead easy with a bit of sand paper