We are seeing this same problem with Touch 2.1 beta 1. We want to automatically move the user from one form field to the next when they have entered the appropriate amount of characters (phone number broken into 3 fields).
It appears to me the fundamental problem, as has been pointed out in this thread, is that Apple only allows text fields to focus when initiated by a touch event. When I call myField.focus() from a button handler it works.
Unfortunately iOS5 doesn't seem to see the keyup event from one text field as a user input to focus another text field. My guess is that after the phone hides the virtual keyboard - the chain of command that the focus() call is coming from a touch event gets lost.
It would probably save a lot of us a lot of time and effort if this was just added to the docs for the textfield focus method. :)