S-ON and S-OFF should not really matter with the Sprint HTC Hero. This handset was made before HTC started creating cryptographically signed bootloaders that required S-OFF to get around. All that S-OFF nets you in the Sprint HTC Hero is the ability to flash unsigned images directly from HBOOT, though the HERCIMG.zip that I mentioned above does NOT require S-OFF, anyway. Having S-OFF IS useful, but not necessary for someone who just wants to flash custom ROMs and kernels.
Anyway, if you could tell me exactly what ROM you are on, I could probably better help you. The Sprint HTC Hero never had an Android 1.6 ROM. It went from Android 1.5 to Android 2.1, skipping over Android 1.6. My recommendation, with the information I have from you now, would be to get back to OEM Android 2.1 with HTC Sense, and then root via Z4Root, and then finally flash a recovery, so you can flash custom ROMs.