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My Nokia internet tablets (770, N800, N810) all have this already, at least the "one-point" ones: drag up on a letter on the onscreen keyboard to capitalize it, drag right to space, drag down to input a return, and drag left to backspace. It's way faster than hitting the key on the screen - you don't have to move the pointer to use it, so fitt's law "maxes out" your efficiency with this type of gesture (the current location is the fastest to reach, and much faster than a potentially distant, small on screen key).
 
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