I've just upgraded to Cyanogen on my G1 and it's lovely. Well, I got root, which is basically what I always wanted.
I basically followed the instructions on the Cyanogen wiki and everything worked exactly as described, I've nothing really to add here except to say it's brilliantly easy and everyone should do it.
One small note, though, the final reboot into Cyanogen takes a long time. Mine took just shy of thirty minutes, and I've read of others taking anything above about 15.
The first obvious benefits are root access, exchange activesync support, five workspaces (as against the stock 3) and a bunch of useful apps already installed, including a nifty power control widget which replaces my collection of 5 distinct widgets. I'll write more on it when I've used it more.
In case, as I did, you've been pondering this and wondering what the end result is like, it's almost exactly as previously, but with some new features, there's some screenshots on the webpage. I've not yet found anything to have been degraded by it, and it all looks and feels the same, but a bit more polished in areas. Though it only ships with one ringtone.