Yeah you're right it's a first gen phone. So is Android. However, the iPhone was a first gen and it was amazing (not complete, but amazing). I don't think anything close to "amazing" could be used to describe the G1 software or hardware, and that's almost 2 years after the 1st iPhone announcement.
Let's wait and see. With WM7 and Tegra (and Palm OS II, and S60 Touch), there's really no room for error with the G2.