PDF For Laywers has a nice discussion about the benefits of using a digitized letter head. Basically he recommends creating a letter head that is part of your word processor template so you can print your letter and letter head together (to paper or to a PDF). Some good thoughts and worth a read for people experimenting with paperless offices.
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I have been doing this for about 15 years using templates in WordPerfect. I have template documents for simple letters, long and short form proposals, fax transmittals, envelopes, shipping labels and a couple of other things. Prints company logo, masthead and tag line. On multipage documents it will pront abbreviated letterhead at the top of following pages. Not that hard to do. Unless you have to have color, a good laser printer does a very serviceable job. The template also translate to document conversion to PDF. As it happens, I send out very few hard copies anymore, but the product looks the same whatever the format.
@Keith – It sounds like you have an ideal setup. While most of my routine correspondence is done electronically (invoices, etc.), I still use real letterhead for things where I require a more personal touch like networking. I’m not ready to give up on my raised print vellum letterhead just yet, but I do have a template setup as an option for times when I’m on the road. But it isn’t anything nearly as extensive as what it sounds like you are doing.