Mosaic knitting is a type of double knitting, I believe. Don't know much about it. The recent issue of Creative Knitting has an article about it and I get the impression that it is double thick.
If you're knitting letters and don't want loops, I'd go with intarsia, with one strand for each letter.
Stranded won't work as well in the round, because your yarn ends up in the wrong place. It can work in certain circumstances when both colors are throughout the design, but if you were to have a stretch for several stitches, as in, say, and E or L, you'd end up with a difficulty.
I'd go with intarsia.