Maybe I'll stick with my current solution which is using Stroke it. I set up gestures for every letter, space, back and enter. I can draw anywhere on the screen and it will type that letter and show a short OSD of that letter. Works pretty well but true handwriting recognition would work better. Stroke it needs you to draw the letters in a very specific way to work.

I remember is vista the cool dots thats it draws on the screen when you press anywhere kind of like a ripple. I wonder if there is something for xp like that.