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##Updated version##

##Second update##

Updated version

Second update

iteration2[img1_, w_, fun_: ( Norm[#1 - #2] &)] := Module[{imdil, centre, diff, dimw, padding, padded1, minpos}, dimw = ImageDimensions[w]; padded1 = ImagePad[img1, {dimw[[1]] {1, 1}, dimw[[2]] {1, 1}}, 1]; imdil = Binarize[ImageCorrelate[Binarize[ColorNegate[padded1], 0.05], Dilation[Binarize[ColorNegate[w], .05], 1]]]; centre = ImageDimensions[padded1]/2; minpos = Reverse@Nearest[Position[Reverse[ImageData[imdil]], 0], Reverse[centre], DistanceFunction -> fun][[1]]; diff = ImageDimensions[imdil] - dimw; padding[pos_] := Transpose[{#, diff - #} &@Round[pos - dimw/2]]; ImagePad[#, (-Min[#] {1, 1}) & /@ BorderDimensions[#]] &@ ImageMultiply[padded1, ImagePad[w, padding[minpos], 1]]] 

iteration2[img1_, w_, fun_: ( Norm[#1 - #2] &)] := Module[{imdil, centre, diff, dimw, padding, padded1, minpos}, dimw = ImageDimensions[w]; padded1 = ImagePad[img1, {dimw[[1]] {1, 1}, dimw[[2]] {1, 1}}, 1]; imdil = Binarize[ImageCorrelate[Binarize[ColorNegate[padded1], 0.05], Dilation[Binarize[ColorNegate[w], .05], 1]]]; centre = ImageDimensions[padded1]/2; minpos = Reverse@Nearest[Position[Reverse[ImageData[imdil]], 0], Reverse[centre], DistanceFunction -> fun][[1]]; Sow[minpos - centre]; (* for creating vector plot *) diff = ImageDimensions[imdil] - dimw; padding[pos_] := Transpose[{#, diff - #} &@Round[pos - dimw/2]]; ImagePad[#, (-Min[#] {1, 1}) & /@ BorderDimensions[#]] &@ ImageMultiply[padded1, ImagePad[w, padding[minpos], 1]]] 

##Second update##

To create a vector graphics of the previous result, we need to save the positions of the words in the image, for example by adding Sow[minpos - centre] to the definition of iteration2 somewhere towards the end of the code and using Reap to reap the results. We also need to keep the rotation angles of the words, so we'll replace wordsimgRot with

angles = RandomReal[2 Pi, Length[wordsimg]]; wordsimgRot = ImageRotate[##, Background -> White] & @@@ Transpose[{wordsimg, angles}]; 

As mentioned before, we use Reap to create the position list

poslist = Reap[img = Fold[iteration2, wordsimgRot[[1]], Rest[wordsimgRot]];][[2, 1]] 

The vector graphics can then be created with

Graphics[MapThread[Text[#1, Offset[#2, {0, 0}], {0, 0}, {Cos[#3], Sin[#3]}] &, {words, Prepend[poslist, {0, 0}], angles}]] 

##Updated version##

The previous code places new words in the image by approximating them with rectangles. This works fine for horizontally or vertically oriented words, but not so well for rotated words or more general shapes. Luckily, the code can be easily modified to deal with this by replacing the MaxFilter with a ImageCorrelate:

iteration2[img1_, w_, fun_: ( Norm[#1 - #2] &)] := Module[{imdil, centre, diff, dimw, padding, padded1, minpos}, dimw = ImageDimensions[w]; padded1 = ImagePad[img1, {dimw[[1]] {1, 1}, dimw[[2]] {1, 1}}, 1]; imdil = Binarize[ImageCorrelate[Binarize[ColorNegate[padded1], 0.05], Dilation[Binarize[ColorNegate[w], .05], 1]]]; centre = ImageDimensions[padded1]/2; minpos = Reverse@Nearest[Position[Reverse[ImageData[imdil]], 0], Reverse[centre], DistanceFunction -> fun][[1]]; diff = ImageDimensions[imdil] - dimw; padding[pos_] := Transpose[{#, diff - #} &@Round[pos - dimw/2]]; ImagePad[#, (-Min[#] {1, 1}) & /@ BorderDimensions[#]] &@ ImageMultiply[padded1, ImagePad[w, padding[minpos], 1]]] 

To test this code we use a list of rotated words. Note that I'm using ImagePad instead of ImageCrop to crop the images. This is because ImageCrop seems to clip the words sometimes.

words = Style[First@#, FontFamily -> "Times", FontColor -> Hue[RandomReal[], RandomReal[{.5, 1}], RandomReal[{.5, 1}]], FontSize -> (Last@Rescale[#, range, {12, 150}])] & /@ tally; wordsimg = ImagePad[#, -3 - BorderDimensions[#]] & /@ (Image[ Graphics[Text[Framed[#, FrameMargins -> 2]]]] & /@ words); wordsimgRot = ImageRotate[#, RandomReal[2 Pi], Background -> White] & /@ wordsimg; 

The iteration loop is as before:

Fold[iteration2, wordsimgRot[[1]], Rest[wordsimgRot]] 

which produces