I rooted my G1 this weekend after being convinced by an article on Lifehacker. I think it was a good decision. I installed the latest Cyanogen Mod, which was just released this weekend. I really like the new camera, the power widget and most of all the snappyness of the phone now. Cyanogen says it uses more battery than the standard ROM, but honestly I feel like I was spending so much time waiting for the phone to respond to what I wanted it to do, I suspect that the real trade off in time is very little.
The thing that took the longest was backing up my 8GB SD card. I also found the MyBackup app to be very handy in quickly getting all of my apps and shortcuts back quickly. (Although I did have to set each one back up... ). DoggCatcher has a very handy back up capability but a non-obvious way of restoring. I was able to short circuit the way described in the FAQ by using taskiller to kill the doggcatcher task and then the Lynda File Manager to delete the done.txt.