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Bought the app earlier today and must say I'm impressed! By far the nicest editor I've seen on the iPad. Textastic paired with Panic's Prompt app make a killer combo. 

I agree with this suggestion, live editing would be a highly desirable feature to me. In most if not all cases I'm going to end up putting the file back on the server (or dropbox) and deleting the local copy anyway, so the whole act of keeping a local version becomes a bit tedious. 
Any updates on the sftp topic? Don't mean to pester, just curious. I've been keeping my eye out for an sftp-enabled iPad editor for a while now.