Texting on a number pad never looked hard to get used to, it just looked slow (and still is). They wouldn't hold speed competitions for it if it was fast.
T9 drastically improves typing speed on numpads. I could definitely type faster on my old Nokia 6310 than I can on my iPhone. I've only had my iPhone for a year but you think that'd be long enough to learn how to type on it.
One thing I've found helps a lot is to just allow yourself to finish a word with a mistake in it and hit space, assuming the auto-correct will get it right. It feels backwards at first, but I think "scrolling" or "backspacing" through text requires a lot more of your attention/a context switch than just correcting at the end of a word.
I guess that does seem a backwards to me, probably because I don't type all that much on my iPod touch. My inclination has been to wish there was an option for the autocorrection to be a little less auto, offering a suggestion but assuming I meant what I typed and requiring me to explicitly accept the correction. If I did more text entry on the device, though, I could see myself coming around on the matter.
When I try to type quickly not even the iPhone knows what the hell I meant to write. :)
And that doesn't help for words it doesn't know. Turning auto-correct off might actually be a good idea for me. I'll have to try it and see if I like it any better.
T9 was incredible; it's one of my favorite pieces of technology. That said, I had a Palm Treo for a long time and that is my all-time favorite typing experience on a mobile device. The slightly rounded keys allowed great accuracy and tactile feedback (both for the "click" and for sensing where the correct keys were without looking).
I have now had an iPhone since the first generation and I still suck at typing on one (on the 3GS now). Auto-correct seems to hurt me more than help even after earnest efforts to trust it and stop hitting backspace.