I did some tests, and yes, there is a surprising winner:
Stanza for the iPhone (yup, this is ePub - text copied from a news site, added to Word 2007, saved as html, converted via calibre).
The letters are connected correctly, the sentences are right to left. Since the iPhone is capable of writing SMS messages in Arabic obviously this feature can be used in Stanza.
Nice to know.
Can't confirm this for the iPod Touch or iPad, though.