I have a rooted G1 and use Cyanogenmod: it provides several enhancements, such as root, which allows for Wifi/bluetooth based tethering. It is also somewhat more responsive and quicker than the official firmware. It does have less battery life, and can be less stable then the official version however.
While it is true that Android is open source, Android without many of the base apps such as Gmail/Google maps is not particularly useful. Still though, this won't prevent me, and other users from using this mod. And since I paid for the phone, and by extension, the applications that came with the phone, I should be able to transfer them to a new operating system on the same phone.