Great demo. That's exactly how the handwriting UI should have been designed.

I have one small suggestion, if you don't mind: How about making the input box increase in size (maybe double in size) so you don't have to write so small? The resizing wouldn't need to reflow the rest of the page; it could turn into a modal textbox in the same location as the original textbox. It would make it easier for children, the elderly and people who aren't native speakers of the language, etc.