Have you tried Dragon Dictation for the iPhone? It’s a pretty remarkable app and the fact that it is free is even more remarkable. If you’re looking for a way to record your thoughts in spoken form and automatically convert them into written form then this app is for you.
I haven’t used this app a lot because even though it does a pretty darn good job of converting my speech into text, I find that I don’t usually speak the way that I write. But it might just get me to change the way I speak ;-).
I also haven’t learned all of the commands for punctuation, but ‘period’ and ‘newline’ work just fine.