I'm posting this here, with some admendments and more detail, as stuff tends to get lost in XDA's forums as the volume of activity is high.
From XDA-Developers (Thanks BoomBoomPow!):
How-to for Cyanogen Mod v4.2.14.1:
(These instructions assume you already have this version of CM running on your phone!)
1. Download Pershoot's kernel image (2.5MB - I'm also seeding it on bittorrent: "kernel-2629-dp_mem-xtra.zip"- Thanks Pershoot!) and place it in the root directory of your SD card.
2. Download and Install CoolBHO's SetCPU app (from Android Market)
3. Create a plain text file called setcpu.txt and place it in the root directory of your SD card. This only text in it will be:
128000,245760,384000,550000
(SetCPU looks for a "setcpu.txt" in the root of the sdcard on startup or when you choose "Custom" from the bottom of the device settings menu)
4. Boot your phone into recovery (Home + Power) and flash Pershoot's kernel image. You should already have a decent recovery installed. I recommend Amon-RA's recovery. I'm seeding it here for HTC Magic 32B only. (For G1/Dream, go to the xda-developer forum for that phone).
5. Once you have booted your phone to the Home screen, open SetCPU. Allow the SU Request, and scroll down to Custom Frequency Config at the bottom of the device list if SetCPU hasn't already picked up the setcpu.txt. If it has, the version will be something like "SetCPU v.1.4.6 custom" as in the screenshot here.
6. Have fun!

Every little bit helps!
At 550MHz, your phone will now be as fast as a Motorola Droid / Milestone....and you can use SetCPU's profiles to wind the speed back when you're not using your phone (in standby) or charging your battery (keep the heat down).
The additional speed doesn't seem to have any big impact on heat. It's only 4% over normal.