Currently, applications on Android devices can only be installed on the device memory, the memory card is not available. This limits the usable memory significantly, because unlike the Iphone, for example, Android phones are only equipped with a relatively small device memory.
According to Techcrunch.com they are currently working on a solution how the entire available memory (including memory card) can be used for applications. When this update will be released and for which devices it will be available is still open - let's hope that it will also come for older devices like the G1.
well, a solution gives yes actually already, apps2sd. But runs only on rooted devices