What you do on the letter depends on which stitch you're knitting. If your square is in stockinette and the knit side is the front the letter stitches will be purled.
On the back where you'd be purling the main part of the block you'll knit the stitches that are letter.
As long as you do it right the first pass then all you have to remember is to knit the knit stitches and purl the purls on that block.
Does that help?