I never use the horizontal virtual keyboard for anything -- I always slide the phone open and use the physical keyboard...
The only time I use a virtual keyboard is when I'm in the Market App, and I need to search for something -- I hit the Search button, and the vertical virtual keyboard pops up automatically, so I use it because it's there, and I'm usually only typing in one or two words to search for anyway. But that's the only time I ever use any virtual keyboard of any type on my Droid. All other times I use the physical keyboard...
I've definitely gotten used to the small keys on the physical keyboard -- I don't type 100% error-free, but then again, I don't type 100% error-free on my computer's keyboard either, so... The lack of Predictive Text while using the physical keyboard has never bothered me... (Yes, I saw the post that allows you to enable Predictive Text while using the Physical Keyboard... But I probably won't bother with it, because I don't feel like I need it...)