Like Ned, I use the on screen keyboard and it is OK. The "real" keyboard is nice if the Droid is flat on a table.
When looking at units earlier this year, keyboards were a major issue. I was OK with my Motorola Q fixed keyboard - other than it lacked certain important (to me) keys. I am a good touch typist, and was pleased to find that "thumb" typing motor movements to keys translated very well. That was a phone like the older blackberries in that the keyboard and screen shared about half of the phone face. When I chose my current Samsung Omnia i910, I had to give up the manual keyboard for the on-screen concept. I didn't like the phones with slide out keyboards because they were too heavy/bulky -- and were referred to as "bricks" by reviewers. From what I read by some on this thread, that is still an issue.
Now that I have had my Omnia for 6 months or so, am still not a happy keyboard camper.

I find the on screen keyboard concept just, OK - but not very satisfying. The only good news is that multiple keyboards are available so there is no lack of certain keys. But other than that, screen touch typing is slow, inaccurate, and leaves the phone face very smudged by noon. As a result, I just don't do much text editing other than short notes and such.
The "still" neat concept of the Omnia that keeps me from going to another phone is the fact that I can use the screen keyboard, the stylus that comes with the phone, or the mouse cursor (that I haven't seen on any other phone}. The later is not a joy stick pointer, but rather the mouse pad movement type. I use all three extensively according to what my needs are. For most accurate texting, I revert to the stylus. And that is unfortunate because unlike "thumb" typing, my motor touch typing skills do not translate - and I am reduced to "hunting and pecking".
Anyway, that is my frustration with all the phone keyboards I have tried so far -- and I also messed with iPhones just to check out their on screen keyboards. And they are the pits just as are most of the others. The Droid has turned my head, but from the reviews, it appears it is also "a brick". My question to those testing here, "is that true in your tests so far"? Am not close to a Vz store so can't check one out myself as yet. The 48gb
Omnia II is due out early next year, so am anxious to try that puppy out.
BTW. I believe the slide out keyboards are meant to be used by thumb typing vs. placing it on a table and trying to type as with a normal keyboard. Or did I mis read your post, Phil? Actually, that is true with the on screen keyboards a well.