It’s about time that the iPhone gets a custom dictionary, and according to this screen from the latest iPhone OS 4 beta, you’ll find one under keyboard settings. Duck yes! (Discover more recent iPhone OS 4 findings here.)
https://gizmodo.com/heres-whats-new-in-iphone-os-4-0-beta-4-5542143
Regarding any settings needing to be altered for this, Gizmodo Reader Dustin notes that “The only setting I changed was [that] I reset the network settings so I could see the new tethering option.” [Thanks Dustin!]