If you want to begin customizing the iPod Touch keyboard you go to the iPod Touch Settings option on the iPod Touch desktop. Go to the second section of the iPod Touch Settings and select General, which is right above Music. In General Settings go down to the fifth section and select Keyboard, which is above International and below Date & Time. Here will be the iPod Touch keyboard settings.
The top option is the Auto-Correction feature, which you can turn on or off. The iPod Touch keyboard Auto-Correction feature can be an annoyance to many, especially if you use a great deal of slang, jargon, or swear words. Below Auto-Correction is the iPod Touch's Auto-Capitalization, which is even more difficult than the iPod Touch Auto-Correction. Feel free to turn the Auto-Capitalization off, especially since you can easily set capitalization yourself. Caps Lock is the next option and it is set off to begin with. If you feel as though you are going to type a large volume you may want to enable Caps Lock, and this may be true of Auto-Correction as well. The bottom option in the top section is to maintain the period shortcut which allows you to just space a couple times and add the period to the end of the last word. This is a pretty nice feature on the iPod Touch and there is no real reason to take it off.
The last section, and option, is to select an international keyboard. This is only useful if you are not an American English speaker, and there are several dozen countries and dialects you can select.