I'm using Handcent as well. I can confirm there seems to be an issue with sending long messages. If you poke around in the setting menu you should find the split long messages option, however, I have that option on and it doesn't work.
I tried to send a message last night and it was under 160 characters, although it was several sentences. It just kept failing to send, I tried it about 30 times, then I cut and pasted the text into 3 separate messages and it worked (reverse order and confused the hell out of my friend).
I've emailed Handcent about this. Their app is much better than the stock app. I've poked around a bit but they seem to have the best SMS app out there for Android, you just have to keep your messages short. Hopefully it's a bug and they'll fix it. If you go to their site you can email a bug/support message to them.