Handwriting recognition is actually pretty good. I've got a MotionComputing LE1700 with Vista Business, and use it exclusively with a pen. I use Onenote, and push todo items to RTM via a custom add-in that I wrote.
Now, it's by no-means perfect, but it is generally pretty good. It could be significantly better if it gave me an easier way of helping teach it my writing style, adding new vocabulary, that sort of thing, but I think the tech has gotten to the point of being generally usable.
Also, to see some good development MS is able to apply to a product, Onenote is actually quite good (and looking around at forums you'll see lots of comments to the effect "I hate most MS products, but LOVE Onenote...") And the prototype they did with InkSeine was quite a break from traditional UI design...
So, I personally think we are at a point where tablets with useable handwriting rec are here, and are more a matter of refinement.