You guys are the real gurus in the actual coding so of course "we users" will accept your final decisions. But before you make your final decision, I request you to do this (please bear with me for a few seconds).

Please take N900 in your hand (right hand most likely).
Now open the phone application with the dialing pad. Hold it comfortably in your hand as if you were actually using the SMS function (press a few numbers if you want). Now imagine you have to correct the spelling mistake and reach out for the rocker button. You have to change the position of the phone in your palm before you can reach there with your thumb, right? And now to press the back space, you have to again change the position of the phone in your palm, right?

Now if you still want to use that as the method of moving the cursor in your text, so be it

You are a mind reader