Without altering the kernel at all, good Samaritan Luke Hutch has gotten multitouch working in his own custom Android applications on the G1.
This video is more than a little programmer oriented, but it does clearly portray the possible functionality of both Android multitouch and the G1's touchscreen (see a Google Maps simulation around 4 minutes) as well as the unavoidable limitations (the Synaptics touchscreen was not physically designed for multitouch, and thereby has some problematic though predictable issues).
Like we've said before, Android really is quite promising. And I, for one, can't wait until it's done cooking (or at least until everyone stops fearing Apple's multitouch patents). For those with G1s interested in duplicating this demo, Hutch has provided all of his software with full instructions on his site. [Luke Hutch via phandroid]