I used this info here BUT we have to use the "rageagainstthecage" option as psneuter will just hang.
Follow the directions here and it's easy.
[APP]SuperOneClick v1.6.3 (Root, Unroot, Enable Non-Market App, Get UNLOCK code) - xda-developers
when you install/root the phone, if you don't see the superuser command or after you root, TURN OFF YOUR PHONE and REMOVE THE BATTERY and the wall charger. Press the power button to discharge the phone, wait 10 seconds, then turn the phone back on and everything should work just fine.
I went from 1.5 to 1.6 with no probs. I also used Root Explorer to delete/remove all the bloatware from the phone.
Myspace is called Clientxx172.apk...it is NOT called myspace.
I have 1.6 setup nicely and it is working great. This is an awesome phone. I was trying all those other launcher programs and replacement home screen apps such as GDE but I find that they slow down your phone and it actually takes you longer to get to apps.
*Tip- make a folder on your home screen (you can rename it, it's tricky, just click on the name itself "new folder" and it will allow you rename it. I placed all of my most accessed apps on screen 1 with a folder for all my GPS programs. On Screen 2 I have all of my wifi items and market. Screen 3 will become the multimedia apps screen. The folders is much faster and cleaner to place your similar apps into. Yes, some of those phones look cool with all the widgets running and desktops but you can make yours look good BUT run faster.
Handcent is a MUCH better app than standard messaging. Try it (just disable the notification on the stock messaging app so you do not get 2 notifications for every new msg).