Ok so at this stage I had Amon's RA-hero-v1.5.2 installed on my phone and I could boot into the System Recovery Mode. The first thing to do from the Recover Menu is to preform a nandroid backup.
To do this turn off the phone and boot it up while holding down the Home and Power buttons.
The phone should boot into the Android System Recovery menu.
Use the trackball to scroll to Backup/Restore, press the trackball to enter.
Select Nand backup from the next menu, this brings up the "Create Nandroid backup" screen.
Press the home button to start the backup.
When the backup completes press the Back button to return to the main menu and select "Reboot system now".

You now have a backup of your stock android ROM, the next step is to install a custom ROM to the phone.
To do this go to the xda-developers.com website and find the ROM you want to flash to your phone. (I am currently running MoDaCo 3.1).
Download the ROM you want to your PC. The ROM will be a zip archive, do not extract it but do rename it to update.zip.
Plug in your phone and pull the update.zip file to the root of your SD card (do not put it in any other directory).
Unplug the phone and turn it off.
Boot the phone while holding down the Home and Power buttons to get back to the recovery screen
First select "Wipe" from the menu, this resets the phone to factory defaults (don't worry, you can use the nandroid backup you preformed earlier to get back to the exact state you were in before you started).
When the wipe is complete select "Apply Update.zip" and let it run.
When it has completed reboot the phone.
First boot on a new ROM usually takes a while longer than usual, don't panic, let it run.

You now have a rooted Hero with your choice of custom ROM. By preforming nandroid backups/restores you can switch between ROM versions without loosing data.

PLEASE NOTE: I take no responsibility for any damage caused to your device as a result of following the steps above. When following the guide on theunlockr.com read the text. The steps have been updated but the video does not reflect this change.