Sadly, the envelope can currently only work with cubic bezier curves (C type). Otherwise, you'll get that exception (Like for L, a straight line segment). Try to tweak your envelope so that all 4 sides are cubics, maybe then it will work.
Ok, also you have to select the letter first, and then the envelope. Yep, I bent all 4 sides of the envelope, but instead of the "Unsupported segment type L" error I now get:
...
simpletransform.parseTransform( "rotate(%f)"%(-angle_p) ) File "/mnt/usr1/usr1/home/tbrown/.inkscape/extensions/simpletransform.py", line 70, in parseTransform matrix=composeTransform(mat,matrix) UnboundLocalError: local variable 'matrix' referenced before assignment
That's due to bug #241565 (https://bugs.launchpad.net/inkscape/+bug/241565).
Open simpletransform.py, and replace all "result.groups" (plural) with "result.group" (singular). Then the matrix parser constructors will work.
Maybe I should copy the corrected code to my file until the fixes are released.