I think it would be useful to offer the option to count a character wrong if you take too long to type it. There are certain characters I have to think about, but I do eventually get them right. I'd like that to count against the error bar so they show up more frequently.
I can only relate my experience so far. I'm in lesson 8. If I consciously think about translating, I'll fall behind. If I listen to the music of CW, then I have more success. It seems to got to make that transition...
a timeout is a good idea. After this timeout the letter will be repeated, and even if you get it right (after the timeout), the error bar will not decrease.