Yes, that is intarsia and it is usually knit flat. If you were to strand the maroon and white there's a good chance the maroon would show through where you catch the floats. Here's some videos and info.
Intarsia video
http://www.knittinghelp.com/apps/fla...layer/play/2/1
http://www.purlbee.com/intarsia-knitting-tutorial/
http://community.knitpicks.com/notes/Color_-_Intarsia
Stranding (fair isle) video
http://www.knittinghelp.com/apps/fla...ayer/play/13/1
http://www.philosopherswool.com/Page...andedvideo.htm
And yes, 58 stitches out of 72 would make very large letters.