This is something Daniel Hooper has came up with and is petitioning to Apple to implement it in future iPads or updates. Though i would expect you will be able to do this with a Jailbreak modification.
iPad Drag To Edit Text – How It Should Be
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A few things i like >> Jessica, coffee, tea, Canucks, The Walking Dead, Boojum, Patrick Jane, Johnny Drama, Future Islands, Wild Beasts, Belfast Giants. DJs at Lavery's Belfast every Friday and Sunday night.
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