The default format that is used by Textastic is UTF-8. As far as I know NSUTF8StringEncoding  doesn't use a Byte Order Mark.

Also, on which iOS version are you? A crash report might help, too. See http://feedback.textasticapp.com/topic/48133-how-do-i-send-crash-reports/

Can you please tell me the exact order of keystrokes? An example would be nice so I can try to reproduce it here.

I'll have a look at the crash logs you sent.

This is the standard password entry behavior on iOS, so I can't change this, sorry.

This should be fixed. Are you using the latest version? (4.1) 

Did you use a Wi-fi connection at Starbucks or a cellular connection? Maybe they have a firewall in place?

Enabling the "Debug Log" setting in the connection's settings might help to find out what's going on.

You can sort the connection list manually by tapping on the Edit button and dragging the entries.

I submitted the iPhone version to Apple 10 days ago. I hope Apple approves it this week.

You can find the website with screenshots of the iPhone version of Textastic at http://www.textasticapp.com/iphone.html

There is also an updated manual available at http://www.textasticapp.com/iphone/manual/