For those saying double-tap-and-hold, it's been mentioned that this will be extremely imprecise. I think the loupe is going to be the standard starting point for any text editing. For instance, Tap-and-hold, position the cursor, double-tap to begin selection, single-finger drag to position the end of the selection, double-tap to end selection and bring up the contextual menu (cut, copy, paste, cancel).
We all have different ideas of how this is implemented. We all think they will work fine. But Apple are the ones actually coding this, and testing it out. They have to be sure that by implementing one solution over another that all existing functionality remains the same. Personally, I'd be angry if they re-assigned any of the existing multi-touch gestures as would millions of others. And as such, I think that the folks at MagicPad are impatient jerks who are going to screw a lot of people over but getting them used to one functionality, which I'd almost guarantee won't be the way Apple does it.
Another issue, as mentioned is that the loupe only appears in text-entry boxes, so safari, sms, email, etc. are out. Apple would have to implement the selection process in *all* applications.
A possible option is that Apple are going to add another keyboard mode that allows directional arrows, insert, home, end, page up/down, and dedicated c/c/p controls. Who here really knows?
My point is, we need to be patient. Apple has a lot of things to deal with regarding c/c/p. They've painted themselves into a corner with the limited hardware buttons, but I'm sure they'll work it out one way or another.
EDIT: Partially out of curiosity, and partially out of necessity for our sanity, I'm trying to think of all the multi-touch gestures implemented on the iphone and what they accomplish. Any help would be greatly appreciated.
So far, I've got:
Flick & Drag - Navigation, scroll
Tap - Selection
Double Tap - Zoom for Safari, pictures, maps (zoom in only ?), iPod
Two-Finger Tap - Zoom out in maps.
Pinch in/out - Zoom in/out for Safari, pictures, maps
Tap-and-hold - Magnification for text input pointer (entire platform)