I was very unimpressed with the stock SMS too, but didn?t want to run through a separate 3rd party app, to avoid lag and battery drain. I found SMS Pop-up and liked it a lot. It still gives you the ability to set tones per contact, and the pop-up quick respond when arriving. Supposedly also breaks up long texts, but I had poor results. GoSMS for me was laggy when using all the features (changing text size and layout, etc.) and worst of all, when sending a message over 160 characters it turned the whole message into random garbled characters. Various recipients on different networks reported this.
BTW, I actually returned the Nexus due to this and several other primary features that I use that just seemed unimpressive.