I know, my Droid is slim, it's shiny, it's great for distracting my son (he loves playing with the animated wallpaper on the phone). But I know what you really want to know. We're writers. What we want to know is, can you write on the Droid?
Simple answer: Yes
Long answer: Yes, but I think you'd have to be mad hatter crazy (or a teenager) to do so. Yes, it has a word processing program. Yes, it has note taking apps. Yes, you can type on on that tiny keyboard. And that's where it breaks down. Unless you're a dab hand at texting, you won't be able type quickly enough for it to be workable.
Now, there are faster typing programs available. (Swype seems to be winning this place right now.) I haven't used Swype yet, so I can't speak to that. There is also voice recognition software out there. I'm using Vlingo. It was free, and does a passable job for things like emails. It "learns", so as it becomes more accurate, it may work for writing. We'll see. But it's probably just easier to leave yourself a voice mail and transcribe it later.
Or, use Google Voice. More about Google Voice later.
(Seriously, I can't help but notice that Google now has all of my information. The day they decide to become evil, I will either have to create an entire new identity or become a loyal minion. Hey, as long as they keep feeding me good tools for my life, I'm picking loyal minion.)