Wi-Fi tethering with HTC Magic Will Wi-Fi tethering work in HTC Magic running Android 2.2?

I wonder also, is the 2.2 update for htc magic a official update or one of these custom ROMs?
Yes, you can do Wi-Fi tethering with the HTC Magic.  However, it might require a custom ROM.

All versions of the HTC Magic except for the Dream/G1 have gotten an official 2.2 update, as far as I am aware.  This includes the T-Mobile myTouch 3G and the Vodafone Magic.