I've had the same problem. I had a Samsung Captivate for a little over a year and at some point there was an update and Swype actually became worse.
I now have a Galaxy Skyrocket and the problem has been the same. Unfortunately I don't know how to fix it, but I hope someone does or I hope Swype somehow goes back to what it was before.
Three problems being:
1. the text is sometimes covered (as previously mentioned)
2. the window will move slightly if you use a punctuation (because the small area available for word options is now blank and moves down, but lags as it does so)
3. the choice in blue will automatically override whatever you've type out (wasn't the case a before said 'update')
