If you have iOS 5 the Mail app offers limited RFT editing. I occasionally look, but I have not seen an a good rtf email app, free or otherwise.
The closest I've come is to create a note in Evernote and email that. The RTF tools are not bad, but other aspects of the email, like title and the fact that it says it comes from Evernote are not. You can email the note to yourself, and the copy and paste the part of the email you want into a new email. Or copy straight from the Evernote app, but the results are less predictable that way.
Anyway, if all you need is some bold, italics, or underlining, here is how to do int in Mail, under iOS 5.