How I fixed private message/chat issue in 10 seconds
You do not need to uninstall anything.
Step 1: close the game.
Step 2: double tap the round "start" button located under your iPhone screen.
Step 3: locate the Haypi icon.
Step 4: hold it until it shakes, and shows a red - symbol.
Step 5: click the - symbol to remove Haypi from the taskbar.
Step 6: open Haypi.
Step 7: click chat, stay in "world" chatroom.
Step 8: close chat, close Haypi.
this fixes the private message/chat, but leaves the alliance chat bug...
Step 9: repeat steps 2 through to 6.
now the alliance chat bug is fixed.
My problem was fixed

anytime you have appear to have a chat issue (related to iphone 4.0.* update) then the quick fix is as given above, just do steps 1-6.