I couldn't find a good source for the circular pyro logo (hint, hint, Valve!) so I made one using Inkscape. Once imported to GIMP, a layer with a brick texture from CG Textures was added behind to make the logo less bland. The logo was reversed from its normal appearance on the Pyro's suit to improve the composition.
The orange lighting on the Pyro was achieved by making a simple custom map using the Hammer Editor in Valve's Source SDK. The custom map contained only a raised platform, a ramp up to it, and an orange light source somewhere below the Pyro's knee level, so as to illuminate the underside of the flamethrower (as you can see, I should have used several).
Posing the Pyro was a little tricky; I wanted the normal, non-taunting stance and wasn't sure how to get the third-person front view while in the game. It turns out that at the end of the taunt animation, the normal stance is shown for a fraction of a second before the view switches from third-person back to the normal first-person view. After many taunts and screen captures I managed to get some usable ones.
Lettering made use of Valve's TrueType font that ships with TF2 overlaid with flame textures from Mega-Tex Studios. I had tried various other GIMP filters and methods to make flaming text and didn't like the results.
The final step was to export a TIFF file and create the spray using VTFEdit. This spray has transparency; the tutorial Create Team Fortress 2 Sprays with Transparency was most helpful.
It's not perfect, but good enough, and has been satisfying and fun to spray in TF2. If you'd like to use this spray yourself, download the .vtf and .vmt files and place them in the folder Steam/SteamApps/[your_steam_ID]