One of my friends turned me on to Swype, an alternative virtual keyboard for mobile devices. Although it is not officially out yet for Android, is has been leaked, and works wonderfully on Motorola's Droid (get it here).
I just installed it, and Swype makes the virtual keyboard on the Droid actually usable! It is a MUST INSTALL on the Droid, and I would never go back to the other keyboard. I might even prefer Swype to the physical keyboard on the Droid, which is atrocious.
If you are trying to install Swype using Mac OS X, you will probably run into the same problem I had, which is that the downloaded zip archive extracts to folder instead of an apk file. I got around this by copying the zip archive to my Droid's SD card and using AndroZip to unzip it (and install it). Piece of cake.