While this selection method works well in most situations, it can become a bit tricky for long selections, especially ones that require scrolling to a destination. That's why I would prefer an option similar to what's in OS X: a combination of a key and a double-tap. That is, after selecting your initial word, you would be able to scroll (without holding down a handle) to where you want the selection to end, tap-hold the key, and then double-tap the ending word. This would select all text between the two double-taps. No need to drag handles around.
As another alternative for selecting text, why not have iOS take further advantage of those arrow keys we hypothetically added to the keyboard? For example, you could tap-hold on the left arrow key to automatically select the word immediately preceding the cursor. Continue to hold and you'd keep backwardly selecting additional words, similar to how the keyboard's delete key works for deleting text. The right arrow key could do the same for the forward direction. At the very least, as already is the case with the arrow keys in Textilus, tapping an arrow key could extend an existing selection in the direction of the arrow.
To save a bit of time when pasting text, you could eliminate the two-step requirement of first positioning the cursor and then tapping the paste command. Instead, a triple-tap could automatically paste copied text at the tapped location. Taking further advantage of the iPad's touchscreen, iOS could also allow you to move selected text by a drag-and-drop. Tap-hold anywhere in a selected region and the text would move with your finger until you released the hold. This would allow users to cut-and-paste in a single step.
When doing brief text entries, such as posting a tweet, I'm usually grateful for iOS's autocorrect--it catches typos I would have otherwise missed. But even here, as evidenced by sites such as Damn You Auto Correct, this feature can be too aggressive. If you fail to review your tweet or text message before sending it, you can wind up with unwanted corrections.
For longer text entries, autocorrect can be more of a nuisance than a help, inevitably "fixing" too many words that it should have left alone.
When autocorrect believes an error has occurred, a pop-up appears showing the suggested replacement word. If I'm lucky, I spot any impending "miscorrections" at this point and tap the pop-up to dismiss it. This prevents iOS from replacing the word. But having to remove my hands from the keyboard, even for this small action, inevitably slows down my typing. If I wind up having to do this numerous times in one session, it becomes a major nuisance.
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