I just learned about Swype

[Eleven]

My Droid X has text-by-voice. I have used it, but usually in the car. Sometimes it confuses words if you don't enunciate perfectly, but that is probably expected.

Swype is badass. It can get better, sometimes it just won't acknowledge what you want to type. Not sure if you can add custom words to it, haven't looked into that yet.