How can I get the market place to allow me to download games compatible with my installed OS? I've flashed my HTC Hero with android 2.2 but market place will still only show me apps compatible with the official firmware (I think 1.6) and can't download new games.

How can I get the market place to allow me to download games compatible with my installed OS?
Unless you still have the build.prop file from your 1.6 ROM somehow, I don't think the OS version is the issue.  I would guess it's blocking based on your device or carrier, not the OS.

Check out the answer to this question to see how to view and edit the build.prop file.  You can report a different device/OS version through that.  If you want to change your apparent carrier, try the MarketEnabler app.