You will have to downgrade to 1.5, but don't worry its not like your phone will be stuck there. No one would want to root if that was the case. The firmware version is based on the rom that you decide to flash. For example I right now have SuperD which is running on firmware 1.6, that's why its called SuperD (Super Donut) Anyway, there are all kinds of other roms, even a number of 2.1 roms.
So anyway, about the 2.1 update, you will not get that. Since you aren't running the default 1.6 that T-mobile gave you, you won't get that update. But once you root you might not care, I know I don't. Because the rom I'm running is much better than what I had, and its better than the 2.1 roms that I've tried. There isn't that many differences between 1.6 and 2.1, I believe its mainly just looks and organization of things. Anyone may correct me and add to what makes them different but I still don't think its that great of an upgrade, especially for a Mytouch that can't really handle it.
Anyway, I can help you with rooting if you need just search for me on Gmail and chat with me -
jordanfritzsche@gmail.com Rooting isn't that difficult, but it can be very confusing. Here is a guide for it -
Cyanogen Wiki
By the way, do you have the old or new v1.2 Mytouch?