Hi,
I am doing this in an iPhone text editor I am writing. For multiple reasons, I have subclassed a UIView to draw the text (instead of a UITextView) and I had to implement something like this to provide a movable cursor like a text view has. What I did was use a fixed-width font (Courier to be exact), then I took the x-coordinate of the touch and divided it by the width of the character and rounded the answer down. This gives you a character index.
However, if it is possible, find a way to do this without drawing the text yourself (if the text is user entered or really anything other than hardcoded) because Apple provides a lot of functionality in its UITextView class that is a pain to replicate: editing, cursor, word wrap, scrolling, etc.
It might be possible, if you can't get touch events from a subclassed UITextView, to put a transparent view/layer over the top of the text and get touch events from that, then you would only have to figure out a way to turn this on and off for editing.
Kyle