Align text by letters instead of text box

In the Align palette click on the options flyout icon in the upper right corner. In the fly-out menu choose "Align to Glyph Bounds" and select either Point Text or Area Text from the sub-menu. For the best alignment results I'll usually use a dummy letter like "E" that is squared to the baseline and cap height line and align that to the target object then type out the text I need. Vertical center alignment of text with other objects won't be as accurate with text strings featuring mixed case letters and cap letters whose features extend below the baseline or rise above the cap height line. 

I also like using the new font height options capability for sizing the heights of capital letters. That works pretty well in conjunction with the glyph alignment options. One thing I wish Adobe would add to Illustrator: functions to align and distribute text objects by their baselines. Some rival applications have such functions and that can dramatically speed up text positioning tasks in things like sign designs.