Correct. The characters appear capitalized on the keypad but the actual input is lower-case, even if I hold the key and specifically select the upper-case character.
Edit: The phone keyboard now appears to be working correctly with respect to case. The standard keyboard still enters everything as upper-case.
I've resolved the issue (I hesitate to say I fixed it, since I didn't "fix" anything). In the keyboard options there is a setting for "Trace keyboard" which is apparently a Swype-type input method. I disabled it and now the keyboard in Pocketcloud works properly. I'm still rather new to Android, I blame my ignorance on that.
I have an HTC Amaze 4G (aka: Ruby) running Android 4.0.3. I, too, had the all caps all the time problem. Per davel23's suggestion I changed the keyboard input type from HTC's "Trace" and it worked - once. All subsequent attempts with changing between the stock keyboards failed, and the all caps made their return.
Upon further investigation I discovered that when using any of the built-in keyboards (it didn't matter if it was the trace or normal keyboard) that the orientation made a difference. If I held the phone in landscape and invoked the keyboard, it was all caps. Turning to portrait and invoking worked just fine. This behaviour does not seem to affect Hacker's Keyboard, the only other keyboard which I have tried (unrelated to PocketCloud, just because the pipe symbol does not work on the stock keyboards).
Hope this helps others, and perhaps is a vital clue to the developers so they can generate a fix.
I've just gotten a new device, the Sprint EVO 4G LTE, running Android 4.0 and Sense 4.0.3. Experiencing the same issue. Swype is disabled, Trace is disabled. Only keyboard option seems to be HTC Sense Input, I don't see anywhere I can change it to a different keyboard.