i understand the bind that google/android is up against, and think it is terrible both in principle and in personal impact.
in order to limit copy-access to android app executables, android depends on sequestering apps in phone storage. while most app producers don't care about limiting access to their executables (apk's), some commercial vendors do. (some common evidence of this is the way that most apps are available for copying by android backup programs like MyBackup Pro, but some aren't.) of course, root access defeats this sequestering - and, in fact, the biggest performance advantage on machines like my G1 is due to jiggering things, with symlinks, etc, so that app storage (as well as some resource cache storage) is physically on the SD card.
the terrible bind is that, on phones like the G1, the phone-storage RAM (192 MB) is a critical resource shared across operational and storage functions, so that the phone works terribly if you have too many apps. and "too many", for a phone that's supposed to be very multi-purpose and extensible, is disturbingly few. it really is a fatal flaw - until i upgraded to cyanogen's mod, things like scrolling would fail to respond most of the time, returning to the home screen or starting an app could take on the order of minutes, etc. and this after i removed a lot of apps, including ones that were occasionally crucial. after upgrading to cyanogen the device works like an, um, dream. i can run everything i need, and more, and the phone is sliced-bread-caliber useful with quick, smooth responsiveness. happy dance!-) now they're bringing down the boot on my savior. darn.
it seems obvious to me that google can't afford to allow undermining of their key provision for proprietary vendors who don't want their .apk's loose in the wild. it's a platform-policy agreement they made. it seems equally obvious to me that this is a damn shame - a profound architectural restriction solely for the purpose of a few overly restrictive vendors, who also happen to be some of the big vendors.
(from many comments, elsewhere, about similar relief from upgrading to cyanogen, i see that my experience with the G1 is not unusual. going back to the standard android release is not an option, so figure i'll stick with my cyanogen install until my contract is up, sometime early next year, and by then there should be other android devices with a physical keyboard and without the cripplingly insufficient amount of RAM. i truly am sad that google is in this bind, and feel that the current arrangement for securing apk's is profoundly flawed, and finding a different approach deserves substantial effort.)