HTC is now making a firmware image of the 1.6 version of Android available for owners of the Android Dev 1 developer phone. Since this is the same basic hardware as the T-Mobile G1, it seems suggest that it is possible to run 1.6 on the G1 without a problem, in spite of what we’ve heard earlier. Whether or not the T-Mobile flavor of 1.6, with all of its extra apps, will fit and be available as an update remains to be seen, though.
You can download the firmware here.