I know exactly what you mean. I don't think it's possible, with the iPad's "one keyboard for all because why would someone want something different?" mentality. One of my biggest issues is the inability to change the keyboard to something more useful.
For others, this is what he means, I think (skip ahead to about 1:50 to see the letters "pop up" as they are typed): [ame=http://www.youtube.com/watch?v=uU1Zc6SNlyQ&feature=fvst]Android 2.3 (Gingebread) First Hands-on: Keyboard‏ - YouTube[/ame]
I think the iPhone keyboard does this as well (don't have one), but it doesn't on the iPad.