Assuming you installed the drivers then you need to download the SuperOneClick v1.6.3. Using 7zip you want to extract it to itself, which will create it's own folder with the extracted contents in it. You can use what ever method you want that puts all the extracted items into one folder, but this is important.
Then download this
Android Forums at AndroidCentral.com This is from RevolutionRed over at Android Central. Extract it and replace the busybox and the two su from the SuperOneClick folder with the busybox and su from this folder.
Turn on your phone and make sure you have USB debugging enabled. Do not allow USB mass storage when plugged into PC.
Open up the SuperOneClick folder and click on the Android Guy. This will open up the exploit.
Make sure psneuter is selected in the upper right hand corner.
You must not select the Root option. This could mess up your phone even more.
Select the Shell Root option, this might take a few tries but once a window appears that say's your phone has a temp root, do not, I repeat, do not close this or any other window that the exploit has generated.
Now navigate to your SDK/platform-tools folder and open up a command prompt by right clicking on a blank part of the folder, and selecting to open up a command prompt.
After each line of code hit the enter key,The red lines are where the spaces should go do not type them in. Type in this:
adb
_shell (you should now have a #. If you have $ something is not right)
mount
_-o
_remount,rw
_-t
_yaffs2
_/system
_/system
exit
adb
_push
_su
_/system/bin
adb
_push
_busybox
_/system/bin
adb
_shell
cd
_system/bin
chmod
_4755
_su
chmod
_555
_busybox
exit
adb
_reboot
Your phone should reboot into the system.
You will need to go to the market and Download the Superuser app.
At some point the su binaries should update, might take it a couple of days, but you will see it update.
Hopefully this has all worked without a snag. If you get any let me know.
Download a terminal emulator from the market and type in: su
If you get a # you are good.
EDIT: If you had Busybox installed before it should still be installed. Use your file manager to go to the location you had it installed before (normally it will be in the /system/xbin if installed with a Busybox installer). If it is still there then you can disregard the Busybox part of the code.