It could mean the former; a character in a play, film, or book, and could also be used to describe a strange or amusing person much like in English - even if that wouldn't fit with this particular sentence.
For the latter you can use 'tegn', but that covers symbols as well. 'Tegn' can also be used to mean 'mark', 'sign' or 'omen', and is often found in composite nouns:
et dårlig tegn = a bad omen
ingen tegn til bedring = no sign of improvement
kjennetegn = charecteristic, (defining) attribute or feature
tall(tegn) = number
bokstav(tegn) = letter
However, if you're strictly referring to letters, then 'bokstaver' is usually the better word.