I'll be adding my own thoughts soon, but until then, I've added my letter to coworkers below.
You're free to use any or all of it for your own letter.
The Center for Gender Sanity has some good books for HR people, employers, and coworkers, including Planning for Transition on the Job.
They also have a fantastic collection of transgender employment links.
The Transgender At Work project also has some great employment resources.
Too many trans people are unemployed or underemployed because they didn't plan carefully or just hope things will work out for the best.
You can't plan for every possible scenario, and some things may be out of your control, but the more planning you do, the better your chance of success.
I'll be writing at length about this soon, but here are the salient points: Most trans people make the bulk of their transition decisions based on financial constraints.
For that reason, it is absolutely essential to think about how you are going to pay (or not pay) for all of this. My friend has written the finest document I've read regarding work transition, and she's been kind enough to let me include it here.
She began her transition at a small company on the west coast, before leaving to pursue her Ph. Thanks again to my friend for that excellent overview!
I work in a fairly open environment that encourages creativity and humor, so my letter reflected that. If you are writing it in memo form, it should read like a memo.