Here is a thought, based on how I have my macbook pro's track pad setup. You know how if you hold down your finger on the iPhone it will show a magnifying glass to help in positioning the cursor? Since you are probably already holding the phone in one hand using the other to move the glass, have it detect if your thumb touches the bottom of the screen while you are moving the cursor (since it has multi-touch) and that would cause it to then highlight the letters under the cursor instead of just moving the cursor. Then you let go and the text is highlighted. Next you hold your finger on the highlighted text and it will show a popup that allows you to Copy / Cut / Paste (this part is how the Windows Mobile works).
- James
Not to criticize but I'm pretty sure Microsoft has that patented. I had slighty different idea that takes in iPhones natural UI. Highlight with a double tap then drag to select the text. Then whatever is selected you drag to the bottom thingy that works like a clipboard that works similar to 'Stacks'. This would also work with photos and stuff. When you go to another app. You hit the clipboard and it unravels itself as a stack and you drag away.
-Also James, ironically