I've carried an iPhone since the 3G came out and I use it all day long. In fact I'm writing this on my 3GS right now. The iPhone represents some truly amazing technology, and one feature I really like is auto-correction when I'm typing. Let's face it--a touch screen isn't tactile, and therefore it doesn't make for a very good keyboard. It seems like every fourth or fifth word I type has to be fixed by auto-correction, else my emails and text are completely illegible. It isn't always the savior of all thumbkind, many times it corrects things when it shouldn't (try typing grrrrr and see what it shows you) and sometimes it takes a perfectly-spelled word and replaces it with a different word altogether.
What I find completely outrageous about auto-correction is that it completely misses the boat on a few simple concepts. First of all, if it is smart enough to know I meant to type an 'e' instead of an 'r', or an 'm' instead of an 'n', why can't it be smart enough to realize I don't want to capitalize letters in the middle of my word? If you take a look at your keyboard, you'll notice that the A, S, and Z keys are really close to the shift key. If you're typing a word that includes the letters A, S, or Z, odds are you've accidentally hit the shift key more than once, and ended up with a frustrating result. The word sizzle becomes siZle. Press delete 3 times and type 'zzle' and you end up with siZzle. Now you have to press delete 4 times, toggle the shift, and again type 'zzle.' That's an awful lot of keystrokes to resolve the simple problem of having accidentally thumbed the shift key instead of the Z key.
It seems like it should be fairly simple for Apple to update the auto-correction to recognize that SHIFT is just as easy to mistype as any other key. Update after update comes out, and so far nobody seems to think it is worth fixing. Maybe they simply don't know about it. Perhaps all the testers at apple have pencil erasers for thumbs, or they only type words that use the middle of the keyboard. I don't think it would be very hard, however, for them to code in some extra intelligence to solve this. Maybe if enough people consider it a priority and bring it to their attention, they'll decide to do something about it and make a great device even greater.
I also have issues with the space bar, and the area of the screen just above the keyboard. This is probably because I'm a fast typer, over 150wpm on a regular keyboard, and faster than any of my friends on an iPhone. Technically speaking, these aren't quite as easy to fix as the shift key, so I'm not formally suggesting it be done. It would be pretty hard for them to figure out that I'm not typing two different poorly-spelled words when I smack the space bar with my thumb while typing, or that I didn't really want to jump down several lines on the screen when my thumbs miss high and land above the top row. It sure would be nice though. Until then I'll try and slow it down a bit.