I know this is a pretty late reply, but I wanted to chime in. Someone else may find this and find it insightful.
I am currently using a G1 (I was a very early adopter), and I have been using Wallswitch since it first came out. I LOVE that app! It does exactly what you could ever want, and much more. You can specify which folder it pulls the pics from, so that you don't accidentally have your freaky-deaky stuff all out when people see your screen (been there, done that)! And of course you can set it to auto rotate at fixed intervals. You can set it to switch as often as every 1 minute, or to switch every few days. It's a simple and powerful app, and I have not found anything better yet.
I will be upgrading to the Samsung Vibrant in a few weeks (HECK YEA!), and you can best believe Wallswitch will be at the top of my transfer list!