The iPad is simply not a good device for inking and I doubt that any third-party software’s going to improve the experience much. One of the problems is that the iPad uses a capacitive multi-touch display that lacks palm rejection. While this is all fine and dandy if you want to consume content, it creates some challenges if you actually want to create content.
Kevin Purcell posted a demo on Notebooks.com of what it’s like to write with a Pogo stylus on an iPad. As you can see in the video below, Kevin’s hand creates a lot of unwanted ink on the iPad. He does have a solution though- just throw an old sock under on the iPad.
My suggestion is to always use the right tool for the job. If you really need to enter text with a stylus, pick up your nearest Tablet PC.