Hi! I would do it in illustrator CS.
Go to Object>Live trace and then make. You can do some experiment to achieve what you want. Note: You can clean it up in Photoshop by adjusting the contrast so that you don't have the in between gray stuff . Photoshop>Image>adjustments>brightness/contrasts.
Good luck

This makes no sense to trace. There's so much detail it'll be much better presented as a bitmap.

Look at Illustrator brushes, you wont get the depth os shade with a single layer but you could reproduce a image similar to the above with a few different layers. Although as Frode says it will look better as a bitmap.

How about an outline trace copied to PS and a few layers of noise and gradients. I can give it a try, if you're interested. Or yes, a brush in Illustrator.

I beg you need it to design a font…
Fonsmith done it well (in my humble opinion)
http://www.fontsmith.com/fonts/fs-sammy.cfm?fontFilter=56

Nice amp ...sans texture.

Perhaps Claire could find a better method of maintain the tonalities by creating two (or even better three) traces using the lighter tonal one(s) to knockout what's needed from the darker tone.

n.

Coreldraw has the best auto tracer ever. You'd be able to fine tune how big of specs you would like in it, as well as how much or little smoothing you'd like, and a host of other things. I've never really seen anything else that comes close to it, if only it had an option for making certain line segments straight when they are close enought already being straight (handy when tracing the flat parts of letters) I would never use anything else. I believe Coreldraw 12 and earlier versions are free now.