The G1 particularly was very limited in ROM memory to store the OS. Rooted phones that are on 2.1 have to install an alternate system loader that increases the system partition at the expense of application partition (meaning that apps need to be stored on the SD card, which involves another tweak).
Smart phone OEMs need to be forward thinking in that they need to anticipate that the phones will be in service at least 2 years and phones will need to be able to run the latest OS 2 years from now. And carriers need to be forward thinking enough to know they need to push the updates out.
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