1) 
Start with an appropriate font. Here I used Tag Extreme. Download it here
Right click on the name on the layers pallett and select "rasterize type"
2) 
Create a new custom blend similar to this.
3) 
Ctrl/Cmd click on the layer to select it.
With the gradient tool set to linear draw the blend by dragging the gradient tool from top to bottom.
4) 
Don't deselect.
Create a new layer
Edit > stroke
Add a 2 pixel gray stroke to the "outside"
5) 
Filters > blur > gaussian blur
Add a .08 gassian blur to the new layer with the outline on it.
6) 
Merge the outline area with the graffiti layer by clicking Ctrl/Cmd+E or select "merge down"
7) 
Select the layer again. Cmd/Ctrl+Click on the layer thumbnail.
Add another stroke, this time make it black and put it right on the graffiti layer.
8) 
Looking good! Now for the shadow.
Duplicate the layer by dragging it to the new layer icon on the layers pallette.
Select the new layer and Fill with black.
9) 
Drag the black layer behind the graffiti layer and move down and to the left a little bit.
10) 
Here I added a background and changed the layer blending mode of the graffiti to Hard light. See how it blends nicely to the background like it was painted on.
