A topic on carving is a rare beast on this forum and one on letter-carving is even more scarce, so a welcome to
DavidRa for raising the subject.
As a carver, the first thing that emerges in this branch of cutting wood is the dreaded issue of sharpening.
By its nature, gouge and twin-bevelled chisels (No: 1 on the Sheffield list) takes the art along an ancient path..... one that does not use jigs.
Chris Pye has also written other books on carving, which describe getting an edge in detail, as we've already seen. He also has a subscription video channel that will, through demonstrations, answer your questions much better than we can here. Worth a few quid to see how it's done. There are a number of very detailed videos on sharpening all the worst shapes, including the Vee tool, which is a new level amusement in its own right.
https://www.chrispye-woodcarving.com/woodcarvingtutorials
I have one of those straight No: 1 chisels that I must have bought over 30 years ago and I honestly cannot remember that last time I used it.
Certainly not for lettering, which I do a lot of recently and when it comes to lettering, a mallet is the last thing you need......... it is all hand-work. Using a mallet is fine for roughing out large baulks of timber to shape, but detail is all done by hand.
Next, you said that the chisel just bruises the wood. From that we assume that the edge of your tool may need 'improvement', but you don't mention what type of wood you have. Put simply, some wood carve and take detail well - Lime, Poplar or Jelutong ( if you can still get it) whilst other types do not. Hardness and curly grain is something that you do not need, certainly when you are just starting out, and most definitely not for basic lettering.
However, when you get further into wood carving, you will read all about the rules, then the shapes and angles to the cutting edges that you must have - and the ones that you must never have., such as rounded corners, rounded heels to the bevels, secondary bevels...... then you'll start to break them all when you find a reason to do so.
Good luck.......