Sounds like your letters are grouped together instead of as a compound path. Select the text, ungroup, then Object > Compound Path > Make.
Then, try your "Minus Front" again.
Edit: added a little more info about Compound paths.
Sure! Think about if you need to make a donut shape. You'd draw a big circle and a little circle inside it. If you look at the artwork in preview mode though all you'd see is the bigger circle. The little circle wouldn't be a 'hole' in it, just another circle on top. If you then make a Compound Path out of those two circles, you'll then get the empty hole in the middle of the donut that you are expecting.
The Compound Path makes those two circle act as one "thing" instead of two. That's why when you made a Compound Path out of all of your letters and tried again, you got the result you were expecting. The "Minus Front" acted on all the letters as one thing, instead of just the top element in the former group.
Does that help?