The Android Community has discovered the instructions on how to update the Google Android T-Mobile G1 with receiving their over the air update. All that is required is a MicroSD card which will hold the new RC29 firmware.
Before you try this however, we issue this warning…You may brick your T-Mobile G1 and lose all your data.
Firstly, download the update from Google…Rename the file to update.zip…Copy the file update.zip to the root microSD…Turn of the G1 and turn back on while pressing and holding the home key…Once you see a triangle with a exclamation sign and a phone, slide open the keyboard and press ALT-L to display the menu and then ALT-S to start the update process…Once update is complete, press Home plus Back to restart and job done.
Of course if you have any doubts about performing this operation you had best not do so, and if you brick your G1 and lose your data Phones Review cannot be held responsible for any loss or damage.
Source — android community