I'm due for an upgrade and considering going the Android route. One thing I'm curious about though is even if you do root your phone and load some other ROM, how exactly do you pay for non-free items in the Market?
On the magic you might not be as pressed for space, but I rooted my G1/Dream. With some work, this allows me to install apps on the SDCard instead of on the phone itself.
The firmware I loaded has everything 1.5 has, as well as some newer features that isn't available yet.
If you don't intend running a different ROM, there should be very little reason, as there's not that many apps that only work with root access.