While the Auto-Complete is good, but it is hard to skip a recommendation since I almost always have a problem in hitting the 'x' and end up in a few irritating cycles of 'delete-word-retype-hit-x'. (Especially bites me when typing acronyms in text messaging.)
Allow click-drag on keyboard with one finger to see which key is selected (like it does today), then use tap with other finger to "hit" the key but DON'T dismiss the selected key! This would allow easier text input for people with fat fingers.
Add proper Persian and Arabic support (UNICODE) to be able to read and write in Farsi or Arabic . Safari doesn't show Persian or Arabic characters properly, characters are separated, Apple needs to update the UNICODE fonts to fix it.
Allow categories in Contacts, so I can keep my private and business contacts separate; I want to be able to sync business contacts with a computer at work and personal contacts with a home computer and not 'infect' each with the other's data. Do the same for Notes and Calendar too and you'll be half way there!
As a user, I expect the UI to behave in the same way across (at least) all native iPhone applications, so that in true Apple style, once I am used to a certain UI behaviour, it is consistent throughout my device. eg. the landscape keyboard, the .com key, accelerometer-driven screen rotation.