I had thought that the lettering on the license plates was done by using an image with all the letters on it. Is this the case, or does the game use another method for the lettering? If this is the case, what is the file that the letters are in?

Why would you think they would be in a file? I would think the game simply paints a string of letters on a blank rectangle. It seems simpler than putting the string in a file.

I actually looked into this myself as I wanted to put a graphic on the number plate but I found it couldn't be done.
I got the idea after I discovered that CMX viewer uses DDS files (s_plate.DDS & s_plate_ATEST.DDS) which can obviously be easily modified to carry any letters or graphic.
But LFS itself does not work in that way, it is just as shiny_red_cobra says, so only the predefined letters and characters can be used in-game.

Happy for someone to prove me wrong though

In many games, there is an image file which has the alphabet, all the numbers (0-9) and some special characters on it. There is another file which lists the locations of the numbers (via vectors or some other means?) and the game picks these letters/numbers/symbols out to place into view. I thought that the license plates were done in a similar fasion in LFS; I must have been thinking about another game.

In either case; is there any way to have a blank numberplate for the AI cars, aside from naming them with a single press of the space bar? The license plate on the open wheelers is in a terrible spot and ruins paint schemes.