Here is my story how i managed to install custom rom on my htc hero with old 1.5 android cupcake.
First of all i had a lot of problems with loading boot which appears after you turn off. So to open it you need: 1. Turn off phone. 2. Press Home(house button) and end call(power button) together, so you will be able to get to boot screen.
In my way it was triangle with exclamation mark with phone under it. So i was stuck on it for few hours. The problem was that i should release the buttons and press them once again. So you will see recovery screen. At same time it was like 3 options to choose from... - factory reset, reboot and flash from sdcard.
So after several factory resets and 1 day after i found one page which said that all i need is to downgrade my Hero. ( http://forum.xda-developers.com/showthread.php?t=645253 , III part ). So i did. After downgrade ( which was upgrade for me) i was able to make backup and install recovery. ( same link, I part ). Before i had error which trying to backup. Also i didn't knew it is so important... without I part you will not get the bootscreen i was talking about. Anyways...
After downgrading all was fine... I made backup. Got good bootscreen and finaly i installed custom rom ( Villain ).
Atm im not really happy with it. But it is better than nothing.
p.s. I noticed that my unlocked phone still unlocked. So factory resets and so on will not effect it.
p.s.s. Im not responsible for your moves, so be careful. Also i advice to check Youtube. There a lot of good videos which shows how to root and install roms.