The nice thing is that the Android OS is based on free/open Linux, and hackers have extracted the security information necessary to load your own OS on your phone. With an open, hackable OS and an open bootloader, the tethering problem is simple to solve: just install your own OS that includes all the same code as a factory-fresh G1, with the anti-tethering stuff deleted. You can even bridge the 3G to the WiFi in your phone, turning your G1 into a self-contained all-wireless WiFi access point (bring along a USB cable anyway, since you need to keep the damned thing charging or your battery will croak in ten seconds flat).
Danny O'Brien describes the moment that drove him to cracking open his G1, and recommends a HOWTO for getting the job done. I know what I'll be doing when I get home!
So it was being stuck without wifi in the Library of Congress the other week that finally made me decide to overwrite the T-Mobile firmware on my Android G1 with something with root access. I was talking with the US Copyright and Patent offices about how to improve access to copyrighted material for the reading disabled (in the hopes, partially, to encourage them to support the Treaty for the Visually Impaired at WIPO the following week).How To: Root Your G1 And Install Android 1.5 Cupcake (via Oblomovka)
In the end, I chose to install JesusFreke's distribution of the Android OS, which now has a great little utility to manage who gets root on your phone (each application's request is intercepted, and you, as user, get to allow or deny it). This tethering application is incredibly easy-to-use, and lets you share your 3G connection via wifi or bluetooth (I haven't tried the bluetooth). You can WEP encrypt the wifi connection, or allow access to only selected users.
Of course, next time I go to the LoC, I'll be sure to keep the wifi node open. I wouldn't want the MPAA guys doing without!