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you will find this tutorial helpful. it covers a technique to do morphing between letters that are different and does so with shape layers
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From your description I would do the morphing in illustrator. I think you can get a better job with a lot less work.
Check out this tutorial:
Or even fancier:
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hi Rick, thanks for showing this workflow which is very handy. in order for this to work in this example, there is an extra step you have to make in illustrator: in order to make this blend work properly in illustrator you actually need to have a small hole in the circle to correspond with the hole in the 6. with some preparation this can work. here is a whole debate about it: Re: blending compound paths with holes, possible?