the keyboard is kind of awkward, especially with the special characters etc, and arrow keys would help there, I agree!
That said, the autocorrect is pretty nice, I hope you have that working at least, this is dependent on using the correct language. Especially when you use multiple languages that's not so obvious.
-Long press the globe left of the space bar, settings
(or go to system settings, language and text)
-Keyboard layouts, make sure in this menu that the languages you regularly use are selected.
-Go back to your message. If you long press the globe you see which language is selected, tap the one you want instead. Or tap the globe to change language (no feedback so you'll have to trust or check by long press or try that it is correct now)
I hope this helps. If not, it's probably best to file a bug report in launchpad, but that would require more detail on what's going wrong exactly