My therapist's advice is to use a letter. I found her advice to be very good. I was hesitant to use the letter, but I found it effective.
She recommends being straightforward but not really going into details. She has a few points:
Focus solely on coming out
Do not try to explain what causes transsexuallity (nobody knows for sure, not important at this point)
Emphasize it's not their fault
Tell them your love won't change
Don't detail plans like hormones, surgery etc.
Let them sit on it for a week
As for the reaction, don't be discouraged by a negative reaction and give them time. Positive reactions are obviously good.
Here is her blog posting:
http://tgmentalhealth.com/2009/12/26/thoughts-on-coming-out-as-transgender-to-family/