Due to some SEO weirdness, a lot of people come to my site (via Google search) that look for iPhone or iPod Touch Chinese input method.
Of course, the best way to input Chinese on a computer is via tablet since Chinese is such a visual language. Now you can write/input Chinese directly on your (jailbroke) iPhone 1.1.4. With Installer add the source: iphonecake.com/src/all. Refresh, then look for HWPen. Current beta version supports both simplified and traditional Chinese. It works pretty well for me.