As you seen before this post I have managed to gain root on the G1 phone, in the mean time their has been easier steps on getting root, and installing busybox...
Here are the steps you can take:
1. Download and install a terminal emulator on your phone. (Click here for Term.apk)
2. Make sure your phone is not connected to your PC and open up the Terminal Emulator and run 'telnetd'
3. Now telnet into your phone from your PC (run 'netstat' in the terminal emulator to get the phone's IP)
4. In the telnet terminal you are now root!
5. (optional) To permanently enable root access you can create an "su" command in /system/bin (Warning: creating su on your system could make you vulnerable to malicious software. You could name it something besides su, but you could still be vulnerable):
cat sh > su
chmod 4755 su
Now you can fire up the Terminal Emulator and run "su" to be root.
Now once that is all done download http://www.billrocks.org/android_libs/bin/busybox to the sdcard, then do:
cat /sdcard/busybox >/system/bin/busybox
chmod 4755 /system/bin/busybox, now you can execute hundreds of busybox commands like a full linux shell!