Have just got a desire too - definitely impressed too - has to by far the fastest phone Ive used which is handy to cope with the proper multitasking

Overall Im well impressed.

If I absolutely had to have one then Id go for the HTC. It loses out on ease of use but is considerably more powerful because of it according to reviews.

You just freaked me out for a second there when I couldnt see it either, but its the simplicity tariff for smart phones you want:

http://shop.o2.co.uk/tariffs/simplicity/smartphone/12_months

£15 a month for 12 months gives you 300 mins a month (more than enough for me) unlimited texts and unlimited data.

Will be nice in 12 months time to hopefully still be using the desire and just paying £15 a monthly, rather than being tied into another 12/18 month contract again (I am assuming once contracts lapse it just goes over to a monthly charge, rather than a new contract)

The one thing I will say against this though, is that buying the phone outright makes me feel its less "protected". On a contract if it went wrong Id have no qualms sending it in to get fixed/replaced. Technically its covered under warranty buying it outright, but its just got a little less peace of mind this way if you get my meaning.

I quite fancy a Desire, as its one of the ones getting Froyo, yo.

No,  You need to root it to install the recovery image.
From the recovery image, you can flash anything.

IMO, you should have the recovery menu anyway, just in case.  Even if you update with an official rom and it goes wrong, the recovery menu will give you a second chance.