Use the new Wrap Tool in SolidWorks 2004. You can sketch text on a plane, and then either, emboss, deboss, or scribe it directly onto the cylindrical face. Check out the Wrap feature under Help.
You can do an offset from surface, and pick the cylindrical surface. If you want a cut, then you would need to use a plane that is tangent to the surface, if it is to be a boss then you would need to place the plane sufficently within the cylinder to get all your text in it.