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If anybody does want to try the factory reset, these are the instructions HTC gave me:

No surprise there then...Did a factory reset and, as expected, it didn't help shit.

I have send my phone in for repair because of this bug/error and explained them what the problem was. I'll probably get it back with a notice saying that they did a factory reset.. Anyway I'll let you guys know when I get the phone back in a week or two.
They asked me to send mine in repair as well after I emailed about the problem. I havent replied because it's evidently a software problem so I don't know what they can do by sending it in for repair. Let me know though, I'd be interested to see what happens.
its happening with my HTC Incredible S as well...I seem to have figured out when it happens
1. Open messages and start a message in potrait mode
2. After partiallly entering the message switch to landscape mode
Now the first time you press backspace....it will cause delete
This wont happen if you start the message in landscape mode. This is HTC bug
I've been emailed by HTC support asking for a video clip of the bug...
*sigh*
Starting to think HTC may be completely incompetent.