1.Turn on WiFi in the G1 (Settings > Wireless Controls > Wi-Fi). Make sure you're connected to a network.
2. Start up PTerminal (search in the Market) and you'll get a prompt once its launched.
3. Enter cd system and hit Enter.
4. Enter cd bin and hit Enter.
5. Enter telnetd and hit Enter. You've now started telnet on your G1.
6. Enter netstat and hit Enter. You'll now see your G1's IP address. You can also find this in the Settings > Wireless Controls > Wi-Fi > and click on your network you're connected to. It will show you your IP.
7. Start up Terminal on your OS X machine, or bring up a command prompt on your Windows box. Type telnet [your.ip.address.we.just.found] and hit Enter/Return. So, if your IP was 192.168.1.101, you'd type telnet 192.168.1.101 and hit Enter/Return.
8. You are logged in as root now. To remount the system file as read write, type mount -oremount,rw /dev/block/mtdblock3 /system from the Terminal/Command Prompt and hit Enter/Return.
....This opens a whole world of possibilities. I've put up a fledgling Android file directory and list here. Its not quite complete, and there's some symlinks in there I didn't properly label yet, but its a solid start.