So this issue is definitely in the Droid/Milestone and xScope Lite browser. Whenever I type <fast> the processor (in the text box?) can't keep up and the keys don't respond as fast like compared to when I'm typing a text message. The Milestone browser's pinch/zoom is too smooth to give up though. :/
This issue is absent on Dolphin and while Dolphin is just as smooth as the Milestone's browser, the pinch/zoom is too buggy and gets annoying.
Ah...decisions, decisions...
I flashed my phone without the milestone browser and the slow input disappeared, however it was either slow input or a real laggy screan.
I also reinstalled swype. I may try to use it as a touch type instead of swiping because I can't get the hang of it, (thanks CorinaCakes).
This is the way it is with phones and new OS. You get some good things, you lose some good things.