I'm using Pages '09 v 4.0.2(751).

I can't seem to find a button, but you can do a really annoying work around.

1. Highlight the letter
2. Increase the size (this will automatically increase the leading too, but we'll get to that
3. In the Inspector, click on the T (text inspector)
4. In the Text portion of the inspector, click the Text button.
5. Under "Spacing" one of the options will be "Line." Under the field where you type in line spacing you should see the word "Single" with two tiny grey arrows to it's right. Click on the word "Single" and a drop down will appear.
6. Select "Exactly."
7. Highlight ALL the text, not just the drop cap
8. Type in an exact point size for your leading.
9. Highlight your working drop cap
10. In the menu under Format>Font>Baseline you'll see "Lower" as an option. Sadly, I don't know a keyboard shortcut for this so you'll hace to do a lot of clicking and dragging.

Hope this helps.

Probably the easiest way to do drop caps is to insert a text box with your character. Use the inspector to adjust the word wrap to you liking.