Yes, I'd been running a pretty recent Cyanogen mod, but not one that was 2.1. I had been thinking about using a 2.1+ mod but haven't had the time to sit down and figure the whole process again. The keyboard on the G1 is great, but that's about it. After installing and using Cyanogen it always felt like the phone was laggy for doing the important things, answering calls, etc.
The best phone I've owned so far for functioning as a phone was a RAZR v3. The best smartphone up until about a year ago was the G1, but with limited ram the hardware has been unable to keep up it seems.
I've flashed my SPL and my rom several times before. Getting close to 20 times I've flashed my rom and 5 times flashing my SPL and I've had little to no issues. Follow the instructions to the T and nandroid backup and you should be okay.