Ok, to start out this reply I will first state a few basic facts of rooting your G1.
*CAUTION* ROOTING YOUR G1 IS FOR ADVANCED USERS AND WILL VOID YOUR WARRANTY!!!
Rooting your G1 will basically allow you to modify your G1 to do whatever you want it to. With that being said I still cannot help you make it scratch your @$$ or pick your nose, lol.
For instance, on the market there is an app named "Task Manager(Free)" or "Advanced Task Manager(Small Fee)" <--I own this one... which will allow you to end un-needed processes. I would be refering to the fact that if you opened a video player and then switched back to home the video player is still running in the background and eating up battery power.
I actually have gained an extra 3-4hrs of battery life by rooting my G1 and installing Advanced Task Manager.
I honestly do not consider any cons when hacking/cracking telecom devices sseing that the only thing I worry about is voiding the warranty.
Another plus to rooting your G1 by using JesusFreke's Custom Firmware is that he now has an app on the market(free) that checks for updates to his firmware. This is an awesome advantage and it works very well.
When I say place update.zip in the root of your sdcard it means to just place it on the sdcard and not in any folders. Having said that, sometimes your G1 will be a picky little Sonuvab!tch and you'll have to do a format and then place the update.zip on the sdcard with nothing else on it.
Have anymore questions just holler at me. I will be off and on throughout the evening...