My fiancee Ana, recently got her iPhone in The Philippines. As she splits her typing time between English and Tagalog, she complained to me that the iPhone's autocorrect was making her Tagalog typing extremely difficult, as the iPhone kept trying to correct all her Tagalog.
She asked me if I knew a way to disable the auto-correct and although I searched around the net for a published solution, couldn't find one, so I had to look on my own. Here is my workaround.
The auto-correct feature is tied to the language that you are typing in. If you disable your English keyboard, the auto-correct feature will be disabled. But the iPhone will not allow you to disable the default keyboard if only one is activated. So all you have to do is activate at least one more keyboard, and you are good to go. As both my girlfriend and I have a need to type in Japanese, we both have Japanese keyboards enabled, so we were already set. But in general, this is the workaround:
Mac OS X Hints
http://hints.macworld.com/article.php?story=20080831194533575