iPad keyboard has broken shift-drag capitalization under iOS 4.2.1

The iOS 4.2.1 update for my iPad brought many welcome features -- and one unwelcome one. Since upgrading, I have found myself unable to use the handy shift-drag trick to type capitals. Now, I move my finger down to shift, place it on the screen, drag to the letter I want, release it -- and get something random. Rarely, it's the character I was aiming for. More often, it's some other character I dragged my finger over on the way to it. Even more often, it's something nothing at all.

The video shows the problem in action. This is really quite annoying -- I failed to log into a server several times this morning, and it wasn't until I watched the password box like a hawk that I could deduce why. Fix it please, Apple!

Thanks to Jon for sending this in