After seeing the excellent tutorial on Instructables on how to connect a serial cable to a G1 phone, I decided to do some followup work on that. I will post my own instructable on how to make your own serial port level shfter later — in the meantime, here’s a little treat: a 1.51 (Cupcake) kernel that lets you actually USE the serial port.
After unlocking your phone and downloading the Cupcake firmware or one of its variants (Cyanogen, JesusFreke and so on), you can try this kernel out by using fastboot (if you don’t know what that is, find an unlocking guide — you will after that!), as follows:
fastboot boot serialport_cupcake
This will let you use /dev/ttyMSM2 as a serial port. I’ve already hooked up a picaxe and servo to it, let’s see what you do 
given the compass, accelerometer and GPS in the g1 phone the navigational applications are obvious…
If you want the technical discussion, I’ve contributed to a thread here. There’s also a config file if you want to build your own.
UPDATE:
Here’s the boot image you can use to flash your gphone with the serial port enabled: you can use fastboot to load the kernel without having to do so at every boot.
Get your phone into fastboot then use
fastboot flash:raw boot kernel_cupcake_serialport kernel_ramdisk_standard
to restore, use
fastboot flash:raw boot kernel_cupcake_standard kernel_ramdisk_standard