lthough, after two rounds, I guess the personal approach is really the better strategy business wise. It leaves the door open for them to come back to you if the first person doesn't work out.
No reason they can't still do that after a letter, especially if they do what dw suggests and go beyond just a form buh-bye.
I can understand the urge, from the employer side. When you've made a tough call between two people, by that point you can be pretty attached to them both, and it can feel really harsh to just send a letter. You want to try to soften the blow with the personal touch, and letting them know how close it was, etc. But while a phone call might make me feel better, it doens't take a lot of insight to realize that it's pretty hard on the unsuccessful candidate.