Handwriting recognition is still somewhat slower than typing, and keeping it real-time on a mobile processor might make things even worse. So, if we are talking about writing an URL, or entering numbers on an Excel sheet, an on-screen keyboard is definitely more convenient (except for the obvious fact that the keyboard will take a sizable portion of the screen).
Yet, provided that the stylus is fast and accurate, and that the user can write using an actual pen, there is an application where a stylus is unbeatable, and that's taking notes as ink. All that's required is basic ink manipulation (with reflow), to insert, delete, change, annotate and reorganize your scribbles; handwriting recognition would be nice, but even a simple background task that grabs what it can for indexing purposes would suffice... and voilà, an infinite (kind of) and searchable (again, kind of) notepad.
Yes, we already discussed all that, when the Courier was still around, and no, I haven't given up hope.