{Update} I just did a test and it works with google docs.  The only thing is that it seemed slow.  This could be my 3G connection however.

Specs from the site..

Character formatting including bold, italic, underline, font face, size, color and highlight.

Paragraph formatting including indent, left, right, center and distributed justification style.

Bullets and numbering.

Inline images inserted from Photo app or via copy and paste.

Support for tables, including the ability to create tables.

Full text search capability.

Copy and paste.

Undo and redo.

Auto-correction and auto-capitalization.

Zoom in and out with text-wrap to device screen width.

Permits structuring of documents into folders.

Integrates with Windows Explorer or MAC Finder to allow copying of .doc files between desktop computer and iPhone over the wifi network.

Tight integration with Google Docs, enabling direct editing of Google Docs documents.

Access .doc files stored in a MobileMe iDisk account or any other WebDAV-based server.

Well, now with cut and paste being easier to use, I found myself grabbing text from google docs and pasting into Evernote. I can then edit and keep editing till I get around to putting it back in google docs via my desktop from Evernote.  This is not perfect by ANY means, but better then nothing… well, its this or nothing.

What I REALLY wish for is either Evernote allow rich text editing on the iphone or google docs doing it.  Its a race boys!!  First one will become my default text system for the iphone, and thus the desktop.

If ANYONE knows of a way to edit rich text directly in the cloud from the iphone, please let me know …