EDIT: I have found a site from the makers that does exactly what I was trying to do, look here. http://www.t-mod.org/

OK, I’m impressed! These guys are getting good.  I’m still in the middle of doing this, really don’t want to break it!  I have done everything so far on a Windows 7 Ultimate 64 bit Laptop, I’m glad to know there is battery backup during the hairy moments. This is what I’ve done so far. Please understand this is my experience, it may or may not work for you, and I am not liable for any costs or damage this guide may produce.

1. PC:Visit http://unrevoked.com/ download the version for your phone and operating system.
2. PC:Ensure HTC Sync is not installed, if it is go to appwiz.cpl and uninstall it.
3. HTC:Turn on USB Debugging. Menu > Settings > Applications > Development > USB debugging
4. Plug phone in to USB and select HTC Sync mode.
5. PC:Open devmgmt.msc and manually install some USB ADB drivers from http://unrevoked.com/rootwiki/doku.php/public/unrevoked3 click the HBOOT Driver link.
6. The software does the rest of the rooting process.

The other thing after that I did was a backup using clockworkmod, once again an easy process.

1. Ensure you have 300~500MB free space on your SD card
2. Power Off the phone
3. Hold down the power button and the volume down button until you receive and boot screen.
4. Select Recovery with the Volume Up and Down buttons, and power button to enter
5. Select backup/restore, this time optic button to enter
6. Select backup. This process takes 5~10 minutes
7. Select Restart System

Backup done, now I’ve just got to get this froyo rom onto it.  On to formatting of the SD card to allow for a ext3 partition

1. I imagine like me their is data on the card you want to use like me, so copy everything off, including the .something directory’s (their important, linux hidden/system)
2. I’m a bit of a linux man, so this was quite easy, I’ll go step by step for you, I use fedora so download a live CD i.e. http://fedoraproject.org/get-fedora
3. Boot from the disk and open a terminal and go to a super user sudo su
4. Plug your phone in and turn on disk drive
5. Type df -h and look for a random string /media/1A2B-3C4D make note of the /dev/sd?1
6. Type fdisk /dev/sd? (without the number),
7. Type P and enter; this will list the file system on the phone, it’ll be one W95 FAT32 partition of what ever size.
8. Type d and enter; this deletes that partition.
9. Type n, enter, p, enter, 1, enter, +6900MB, enter; this creates the first partition, use a number appropriate to the size of you memory card
10. Type t, enter, 1, enter, b, enter; now we’ve set this partition as DOS FAT32
11. Type n, enter, p, enter, 1, enter, +1024MB, enter; This will be our EXT3 linux partition for A2SD
12. Type n, enter, p, enter, 1, enter, enter; this will use the left over space
13. Type t, enter, 1, enter, 82, enter; now we’ve set this partition as SWAP
14. Now the point of no return, You better have backed up the memory card.  Type w, enter. (If not type q, enter and start from step 5 again)
15. Now just formatting the partitions, type mkfs.msdos /dev/sd?1
16. Then the EXT3 partition, type mkfs.ext3 /dev/sd?2
17. And the SWAP partition, type mkswap /dev/sd?3
18. Eject the phone, and it will comment that the SD card requires formating, I don’t know why as we should have done it, but it is fine to do it
19. Copy you stuff back on and you’ve done the next step.

If you want to get ahead of me, this is what I’m following, plus some extra googling.

http://forums.whirlpool.net.au/forum-replies.cfm?t=1495099

UPDATE: Making a gold card is now not required to root/update your HTC Desire please see this post

I’ve resently been given a program that creates the gold card in the most easiest way that I’ve seen. It was a process of HexEditing the card itself, but this program does it all for you. You can download it from http://forum.gsmhosting.com/vbb/f606/gold-card-android-phones-1009439/

Now I’ve just got to figure the next step.