Kelita
Android Enthusiast
I tried Chomp at first and liked it (except for the ads) until a friend told me about Handcent and have been using it ever since. I like the fact that it has a lot more options, you can send greetings from the app and they just updated it to control the flashing of your LED.
If you didn't already find it, it's under "Quick Reply and Compose" -- uncheck the first two boxes ("Locked Screen" and "Home Screen/Apps"). This was something in a recent update that was set on by default, because it only recently started happening. Doesn't bother me having my texts visible (I have the big widget on my lock screen), just hated having to dismiss something unnecessarily.