Rectangular pseudo-fractal

APL, 25 chars/bytes*

{⍉⍣⍵⊃{a,⍺⍴⍨⍴a←⍉⍪⍵}/⌽⍵↑⎕A}

Exploded view

{                   ⍵↑⎕A}   ⍝ take the first ⍵ letters
    ⊃{           }/⌽        ⍝ fold over them, using the first one as initial accum. value
            a←⍉⍪⍵           ⍝    ensure the accum. is a table, transpose it and call it 'a'
        ⍺⍴⍨⍴                ⍝    make a table as large as 'a' filled with the next letter
      a,                    ⍝    append it to the right of 'a' and loop as new accumulator
 ⍉⍣⍵                        ⍝ transpose the result as many times as the original ⍵ number

Examples

      {⍉⍣⍵⊃{a,⍺⍴⍨⍴a←⍉⍪⍵}/⌽⍵↑⎕A}¨⍳8
A AB  AB  ABDD  ABDD  ABDDFFFF  ABDDFFFF  ABDDFFFFHHHHHHHH
      CC  CCDD  CCDD  CCDDFFFF  CCDDFFFF  CCDDFFFFHHHHHHHH
                EEEE  EEEEFFFF  EEEEFFFF  EEEEFFFFHHHHHHHH
                EEEE  EEEEFFFF  EEEEFFFF  EEEEFFFFHHHHHHHH
                                GGGGGGGG  GGGGGGGGHHHHHHHH
                                GGGGGGGG  GGGGGGGGHHHHHHHH
                                GGGGGGGG  GGGGGGGGHHHHHHHH
                                GGGGGGGG  GGGGGGGGHHHHHHHH

⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯
^{*: APL can be written in its own (legacy) single-byte charset that maps APL symbols to the upper 128 byte values. Therefore, for the purpose of scoring, a program of N chars that only uses ASCII characters and APL symbols can be considered to be N bytes long.}

GolfScript, 30 characters

~(,[0`]{{[49+]1$,*+}+%zip}@/n*

Example (run online):

> 7
01335555
22335555
44445555
44445555
66666666
66666666
66666666
66666666

Python 2.7 - 85 103

This uses the zip(*s) syntax to continually transpose the list. Big thanks to Daniel for his tip that shaved 12 characters! Then shaved a few more by using numbers instead of letters.

s=[]
for i in range(input()):x=1<<i/2;s=zip(*s+[chr(65+i)*x]*x)
for i in s:print''.join(i)

Also, this uses 1<<x rather than 2**x as bit shift has lower(?) precedence. Observe:

>>> 1<<(2*3)
64
>>> 1<<2*3
64
>>> 2**2*3
12
>>> 2**(2*3)
64

And some output:

10
01335555777777779999999999999999
22335555777777779999999999999999
44445555777777779999999999999999
44445555777777779999999999999999
66666666777777779999999999999999
66666666777777779999999999999999
66666666777777779999999999999999
66666666777777779999999999999999
88888888888888889999999999999999
88888888888888889999999999999999
88888888888888889999999999999999
88888888888888889999999999999999
88888888888888889999999999999999
88888888888888889999999999999999
88888888888888889999999999999999
88888888888888889999999999999999