It's not that bad. It's worth the AT&T service - Verizon is starting to suck these days, at least in my experience.
Once you get used to the keyboard, you can type without having to look at the screen. It actually feels a whole lot easier to type on than the ones with keys you have to physically press. With the iPhone and iPod Touch, it is literally just a touch of your finger, even a very light touch.
I can type on it pretty fast since I don't have to press. That's my downfall with the hard keyboard devices my friends and family subject themselves to - it's the pressing that gets me, because of my big thumbs. Since the capacitive touchscreen only requires your finger enter its range to receive "contact", and not a physical press as other touchscreens would, you don't have to press down, and so the size of your fingers makes no impact like it does on resistive touchscreens and hard keyboards.
It's really hard to explain, but once you have used one for a few weeks, you understand its advantages. You may want to find a friend that has one and borrow it (or hang out with him/her for a while) - or stroll into an Apple or Cingular store to play with one as often as you can, because you really cannot get the whole sense of it just from reading about it or playing around with it for a day
In the shortest terms I can possibly think of to describe it - Apple focused on making easy user interface/interaction the key ingredient to the iPhone and iPod touch. They got it right.