One welcome sign is an effort by companies trying to improve Microsoft Corp.’s (MSFT) Windows Mobile operating system, which has a reputation for confusing navigation and hasn’t had a major update recently. Kinoma Inc., for example, recently released an application called Kinoma Play that runs on Windows Mobile devices and gives users a markedly better way of handling photos, videos, music and Web browsing.

The HTC Touch Diamond, due out this month from Sprint, tries to hide Windows Mobile software.

This week, I tried yet another software program that is designed to run on top of Windows Mobile software. But this time, the software is at the heart of a device designed by the same company: HTC Inc. I tested the HTC Touch Diamond, due out from Sprint (S) sometime this month for $250 (after a $100 mail-in rebate) with a two-year contract.

Taiwan-based HTC started out in 1998 as a maker and designer of mobile devices for other companies. A year ago, HTC launched the first device under its own name in the U.S., and now, Sprint, AT&T (T) and T-Mobile (DT) sell HTC-branded devices. The Diamond incorporates HTC software, as well as software from Sprint, MobiTV, TeleNav and others. But it isn’t a stretch to imagine HTC trying to create a fully end-to-end model (hardware and all software) in the future.

The Diamond has a touch screen, but it’s smaller than Apple’s (AAPL) iPhone — 2.8 versus 3.5 inches. This screen lacks the iPhone’s multitouch functionality, and its smaller size robs space used for touch gestures like flicking or scrolling with a finger. Yet like the iPhone, it relies solely on an on-screen keyboard for all text entries. Even with the Diamond’s stylus, the keyboard felt small and cramped. Using just your fingertips was next to impossible.

After using the Diamond for a week, I can say that despite its handsome TouchFLO 3D software and animated icons like photos that flip from one to the next with a flick of finger, this device failed to disguise the frustrating interface of Windows Mobile often enough for my taste.

It reminded me of the brown paper bag book covers my Dad helped me make for schoolbooks when I was a kid: They looked great on the outside, felt sturdy and clean and created a blank canvas for homemade doodles that were often more interesting to me than the books they covered. But my book covers couldn’t change what was underneath; pages of frustrating algebra were just a flip away.

HTC’s sleek software tries to hide Windows Mobile, but menus from the Microsoft operating system are constantly popping up. HTC’s email program, for example, is represented by an animated envelope icon that, when selected, cleverly flips twice before sliding an email message half-way out and giving you a three-line peek at what’s inside. If only reading and responding to email were half as entertaining. Selecting the animated envelope opens the old, cumbersome Windows Mobile email program.

Also, the touch capabilities of the Diamond’s screen didn’t work as well as they should. Finger flicks that should have scrolled through lists instead seemed to select individual items in a list, as if they were sticky.

The Diamond isn’t all bad, of course. Plenty of people will like its smaller size because the iPhone and RIM’s (RIM) BlackBerrys seem too large and brick-like to hold up to an ear for phone calls. Next to my BlackBerry Curve, the Diamond was of comparable thickness but measured smaller in width and length.

Despite its size, the Diamond is packed with features. It has a 3.2-megapixel camera with autofocus that doubles as a camcorder, and comes with four gigabytes of internal memory and a removable battery. I taped short videos — something the iPhone can’t do — and found the sound and video footage to be adequate.

HTC touts the Diamond’s browser, which is based on the Opera browsing engine but is designed for HTC. It opens Web pages in views that fit the screen and text is automatically resized as users zoom in or out, though this resizing was sometimes slow.

Unlike the iPhone, Web sites that are opened on the Diamond’s browser don’t resemble the actual site as you would see it on your computer. I opened CNN.com (TWX) and WSJ.com (NWS), two sites that are packed with text and graphics on a regular browser. On the Diamond, they quickly were rendered in list format with mostly text-only. I easily touched the screen to follow links to full stories.

Like the iPhone, the Diamond has an accelerometer, though it’s called the “G-Sensor.” When it worked, this feature flipped the screen to match the horizontal or vertical direction in which the device was being held. Photos flipped instantly, but the Diamond’s G-Sensor took almost three full seconds to respond as I flipped from vertical to horizontal while using the browser. And some Web sites didn’t respond to the G-Sensor flips at all.

A special YouTube application developed by HTC was easy to find on the device and worked quickly. My videos were organized into categories for All, History, Bookmarks and Search, though this last category required using the finger-fumbling keyboard. In one step, I emailed a link from a YouTube video to a friend using the device, with a still shot from the video included in the message.

Overall navigation on the Diamond isn’t as intuitive as on the iPhone or iPod Touch, nor was it as easy as on a touch-screen Windows Mobile device running the Kinoma Play application. The iPhone and iPod Touch use quick double-taps on touch screens to zoom in or out, and multitouch capabilities resize images with pinching gestures; Kinoma Play uses a long touch to zoom in. The Diamond used double tapping on some screens, but not enough for me to grow comfortably reliant on it. A small, circular pad beneath the device’s touch screen provided a more dependable method for zooming in or out of screens: tracing the perimeter of this circle clockwise with a finger zoomed in; counterclockwise zoomed out.

The HTC’s software animation is put to good use on its Weather screen. Here, animated illustrations of each day’s weather appear on the screen: suns spin, clouds move in, rain appears to fall. Even moons appear on the device at night to accurately reflect the weather in a city at a specific time.

It is exciting to think about other mobile-phone companies giving better software a real try, especially those that attempt to improve Windows Mobile. But HTC’s Touch Diamond doesn’t hide the outdated operating system well enough or often enough for a user to want to buy a whole new mobile device.

Edited by Walter S. Mossberg

• Email us at mossbergsolution@wsj.com. Find this and other columns and videos online free at the All Things Digital Web site: http://walt.allthingsd.com