Can I Update my T-Mobile G1/HTC Dream so it runs Android 2
No.  You must root your phone and install a mod such as CyanogenMod to get your phone running a semi-equivalent of Android 2.1+.  There is no stock rom for Android 2.1+ for the G1.  Additionally, if you do go with CyanogenMod, not all features are fully supported due to hardware limitations, such as LiveWallpapers.