I swear I could do this on my Incredible (with the beta version of Swype) which didn't have the red dot on the cursor. The Swype help built-in to the phone says to select the word and then press the Swype button, but the only way I can select a word that I can find is to double click it, which turns it orange. When I press the Swype key at this point, all it does is give me the option to pick a different word, not any option to delete. If I type "Yeah" and it comes up with "Utah" one more time, I swear to God. I'm never going to type Utah in my damn life.