Drop caps in pdfLaTeX

Thank you very much for quick responces! Actually, both comments by hop and Charlie Martin were useful. lettrine.sty is a fantastic package, and it works if scaleable fonts are used.

So, the solution was to force Type 1 CM fonts instead of default CM and use lettrine.sty. lettrine.sty documentation suggests to \usepackage{type1cm}.

This works:

\documentclass[12pt]{article}

% works with pdfLaTeX
\usepackage{type1cm} % scalable fonts
\usepackage{lettrine}

\usepackage[papersize={12cm,4cm},
    left=0.5cm,right=0.5cm,
    top=0.5cm,bottom=0.5cm]{geometry}

\begin{document}
\lettrine[lines=3,slope=-4pt,nindent=-4pt]{W}{ith} a drop cap, the initial sits
within the margins and runs several lines deep into the paragraph, pushing some
normal-sized text off these lines. This keeps the left and top margins of the
paragraph flush.  In~modern browsers, this can be done with a combination of
HTML and CSS by~using the float: left; setting.
\end{document}

And this is the result:

Thank you!

PS. dropping does not work correctly even with type1cm.

UPD. This example also works with xelatex.

Try another font, one with scaling; this looks like the PDF isn't finding a big enough font for the cap-W and is substituting. The other option is to use a dvi-to-PDF translation.