OK, now I've figured out how to use the TunesTEXT2Lyrics lyric import utility, and it works quite well! (Sorry PC folks,
AFAIK it's for Mac users only)
There's a little Dashboard Widget called TunesText, that you can get here:
http://www.cyanworks.net/downloads/TunesTEXT0.7.4.zip
This is basically a Mac version of the Lyric utility, but it's a bit more advanced. It has multiple search engines, you can control iTunes from it, it finds many more lyrics, and when it fails to find them automatically, you can type or paste lyrics into it.
It saves the lyrics into individual song plist files, sorted into Artist folders, at this location:
~/Library/Application Support/TunesTEXT
To test it, I sorted my playlist in iTunes by Artist, then started playing at the first song of an artist, then opened the Widget. As it acquired the lyrics, I chose next song until I had all the lyrics for that Artist. Not only did it create the lyrics files, it also simultaneously added them into the song for viewing in iTunes on your computer.
To convert those files to iPhone Lyrics compatible files, I launched TunesTEXT2Lyrics, and dropped the Artist folder from ~/Library/Application Support/TunesTEXT/ onto the window. Poof! It created a folder on my Desktop called Lyrics with a single plist (named for the Artist) containing all those songs. I added that to my Lyrics Folder on the phone, then added the artist name and path to the LYLibraryCache.plist. As if by magic, all those songs worked perfectly within Lyrics on the phone.
I retested this dragging multiple artist folders as well, and this worked perfectly too. In addition, the program creates a file called LYBlackList.plist which contains a list of any songs that were in the Artist.plist that were missing the lyrics.
Hope that's clear.