I have successfully installed Froyo on Desire and did not experience any problems.
During the first try I was stopped in process by a 25 Mb free RAM requirement. I needed to uninstall a few programs and Google Earth alone takes a lot but is easy to re-install.
All settings and data is kept and all downloaded programs still work after the update.
I find my phone somewhat faster but it may be a wish, that it has to be so.
I expect a lot more battery lifetime now, since processing is much faster, then the CPU should work much less, which in the end must improve battery life.
Update
Battery time has not improved im sorry to say. Battery time seems to be the same. I find it rather strange. A four times faster program must be using 1/4 active CPU time, which in turn should be positive on power usage.
Update 2
I have not really experienced any improvements in speed. Response times are mostly the same when using the phone in daily use. I have not really experienced much change even though there should be drastic changes in the kernel.