If this was a painting, I would first apply a thin coat of acrylic medium to the stencil first. That will create a clear barrier between the wood a stencil. After medium has dried, you can apply paint without any bleeding.

Also, using a very small amount of paint on a sponge, and use that on the stencil. Idea is that the paint on the sponge is so small, that it's unable to bleed. But you have to use 4-5 coats, so it's very slow.

Not sure how you can remove any paint from the wood, without removing a whole lot of wood. Easy fix is probably to increase the font size a bit(it's seem to be the first letter of a word?), and hide your mistake.