Possibly not according to Engadget:
Pioneering T-Mobile G1 owners have been enjoying the spoils of Android 1.5 (or Cupcake, as it's known 'round these parts) for months now, but it looks as if that very treat will be the last taste of confectionery goodness that the smartphone gets. According to Android software engineer Dave Sparks, a time is soon coming when devs "wont be able to fit the latest [Android] release on the G1's internal flash," and yet another engineer has chimed in via Twitter to say that he "can't promise" that any update after 1.5 will fit. For whatever reason, HTC gifted the G1 with an incredibly meager amount of internal flash, and considering that no Android phone will support app storage / loading from a microSD card, there's no way to free up room for Donut, Eclair or Flan. You've been a real champ, G1, but without 2.0+, we just can't give you the love and devotion you truly need. Go on, call us fickle -- we deserve it.
However, I'm sure there will be a hacked release available, since Droiddog reports video's showing Android 2.0 running on a G1. So keep an eye out for the guys over at XDA Developers for getting a cooked ROM.
Most likely it will be possible, but they probably won't support it...