I agree the iPhone keyboard is terrible. My main issue isnt even about hitting the wrong key, its when you hit a key, and nothing comes up. Its like my fingers are faster than the iPhone can process them, which is unheard of. Or for some reason, you hit space and it does a return instead. Before plunging to the iPhone 4 years ago, I used to use mobiles with physical keys. Loved it. Which is why I was so apprehensive about getting the iPhone 3GS. But after playing around with friends' iPhones, I realized the keyboard was actually pretty good. The keyboard sold me on the 3GS. Not sure what they did, but prior to iOS 4, my 3GS under iOS 3.x.x was great when it came to the keyboard. I never had any issues. It was very responsive, and accurate. After iOS 4, thats when I started noticing all the problems we currently see now. So definitely a programming issue.
My take, they should make something like what the Galaxy SII does, the finger sliding. Or incorporate a vibrate for each key pressed. At least that way youll know you actually touched the key and it reacted accordingly. Sure they have the tone sound, but I find it annoying to hear clicking sounds every time I type. But ultimately, just make it work better than it does. The main issue for me with the iPhone keyboard, is it's not very responsive and accurate as it used to be in iOS 3.x.x.
The iPhone does many big things great. But the little things that DO matter, have suddenly been over looked the last couple of years. Its like they concentrate on more BLING, than substance.