Dunno about myko, but every time I use an iOS device it really confuses me. Comparing it to a physical keyboard isn't fair, since on software keyboards shift is stateful. lower/UPPER casing the keyboard is a much larger (very convenient) indicator of that state than the altered shift button.

I think I'd actually find it quite distracting while I am typing.

WebOS doees it and it's incredibly distracting; it looks like every key jitters slightly every time I hit the shift key.