UIQ had a fancy onscreen keyboard where you could write with the stylus if you wanted and the words were picked up ... anyone know if Android will have a similar handwriting recognition system?

Looks possible in the future but it's not clear if Android will adopt it itself (which is what you're actually after finding out). I suppose some people will be giving it a try after cupcake gets released.

Google Groups

And as if by magic, a video showing what Android handwriting recognition could be like appears :


PS This isn't really Android but its entertaining nevertheless!