I agree with the suggestion to use the lettrine package and the yfonts (actually the s-yfonts) package. In fact, I used both together when I typeset The Wizard of Oz as a gift for my wife:
%% The s-yfonts package is nearly the same as the yfonts package found
%% on CTAN. The main difference is that s-yfonts allows free scaling
%% to any size.
\usepackage{s-yfonts}
%% Use the Schwabacher black-letter family for titling
\newcommand{\titlefont}{\swabfamily}
\usepackage{lettrine}
\renewcommand{\LettrineFontHook}{\titlefont}
The lettrine package has an awkward interface, so I built a pair of macros that were easier to use in my opinion:
\def\LettrineWord#1#2 {\lettrine{#1}{#2} }
\newcommand*{\Lettrine}[2][]{
\def\tmp##1##2 {\lettrine[#1]{##1}{##2} }
\tmp#2
}
Here's how to use the \Lettrine macro:
\Lettrine{While} the Woodman was making a ladder from wood which he
found in the forest Dorothy lay down and slept, for she was tired by
the long walk. The Lion also curled himself up to sleep and Toto lay
beside him.
It seems I didn't end up using the \LettrineWord macro, but I recall my original plan was to add it to the definition of the \chapter macro in order to make the first word of a chapter automatically have a drop cap. I think I decided against it because I needed to change one of the chapters to use a different font:
%% I much prefer the Fraktur `D'. I really should have a virtual font
%% to do this automatically.
\lettrine{\frakfamily
D}{orothy} lived in the midst of the great
Kansas prairies, with Uncle Henry, who was a farmer, and Aunt Em, who
was the farmer's wife. Their house was small, for the lumber to build
...