I just updated the firmware on my Motorola Droid (version 1, two years told).   Project Elite 5 was the first ROM I loaded after I rooted my Verizon Droid Version 1 phone.  I updated to CynogenMod 7, but it appeared to be buggy, and I had performance issues, including the phone rebooting while using the GPS.  I’m currently running the Steel Droid 9.0 ROM.  

Upgrade Guide – the guide is very complete, but my notes are below

1. Backup apps using Astro File Manager
2. Backup SMS using SMS Backup & Restore
3. I used RZ Recovery ROM, but I’m getting 404 on all the download links and I have ClockworkMod Recovery installed now.
4. Follow the install guidelines and delete/format all data and cache on the device. 
5. Install the optional ROM
6. Re-install Astro and SMS Backup, and restore your apps and data.
7. Enjoy your new ROM!

Reference Links

Project Elite – Droid 1 Only

CyanogenMod 7 for the Motorola Droid :: V7.1.0 (9 Oct 2011)

Steel Droid – V9.0 for Droid 1, downloads for Droid 2, Droid 3, and Droid X

MIUI – next one I’m trying

RZ Recovery ROM install