What I've found with the G1 battery and my poor battery life:
The phone worked great for the first 6 months or so, and then the battery wouldn't charge after on the charger all night long, all day after that too would only show 18-25% charge. The phone would constantly shut down and after waiting some time it would turn back on, but if i would turn it right back on it would just die before it even booted the sim card info. After about a week of this I put my battery in the wifes phone, it did the same thing. However her battery in my phone and it was like it was when I first got it.
After further examination of the batteries, my batter is "bulged" out from the center and does not sit flat. Now the sitting flat is not whats causing this issue. you can hold it in there or wedge it but it doesn't fix it. So comparison of the batteries shows there is some sort of defect in alot of these batteries causing them to swell and i assume after prolonged use like this and constant charging of a cell that wont charge might cause severe damage or injury and i recommend just replacing your battery if you are experiencing any of those things. don't risk ruining a 2-400$ investment.