In my physical keyboard settings, I have "Auto-replace" unchecked, and my physical keyboard auto-corrects i to I, even mid-sentence.
Auto-punctuate, and Auto-capitalize (the only other two settings for my physical keyboard) are both checked, if that helps.
Edit: quick test, out of the box (I haven't tweaked on-screen keyboard settings other than to enable Swype), like another poster, my stock keyboard doesn't auto-correct I, but swype does. But physical does and has since day 1, also without changing any settings.