This is what got my Milestone working very well with 2.2.1 with the odd slow down, which was normal for it on the odd occasion anyway.
Do a backup (with Nandroid or something like Titanium Backup for root, here is a helpful video for Titanium backup,
YouTube - ANDROID Applications (How-To Backup & Restore) *Titanium Backup*, which Titanium is available on the market) before you try this as you will need this to get all the info back to your phone. I use Titanium backup for root, and it stores the info on your sd card. I don't know how to back up your phone without root, sorry.
After this, do a hard reset and dalvik cache wipe (which from what I have read is a full phone cache wipe, all cache info will be wiped, not just for particular apps and such) from the recovery menu.
To get to the recovery menu some people turn the phone off, then hold down (and keep holding down) the x button while powering it back on, or hold (and keep holding down) the camera button while powering it back on. This is supposed to get you to the "triangle with exclamation point in the middle" screen. I didn't have success for some reason with either of these methods, getting frozen at the triangle with exclamation point screen (of which I just pulled the battery then it rebooted back to normal) so
I used an easier method with the Rom Manager app from the market which has an option to get to the recovery menu built into the app.
Both the hard (factory) reset and dalvik cache wipe are in this recovery menu (it just says "wipe cache", but this wipes the dalvik cache and from what I have read). You will have to use your slide out keyboards directional pad to navigate this menu, and use the middle of the directional pad to click on the options.
I did the wipe cache first, then the hard (factory) reset.
After I let the phone do this. I reboot it and played with it for a bit before I re-installed the titanium backup and it felt really zippy.
After this, I had to go to the market to get titanium backup (as it was wiped from my phone) and re-install it. Went into the app and and started the re-install procedure.
I would also recommend installing the apps2sd app from the market before you start restoring your info as it should install the apps from your backup automatically to your sd instead of you having to go into your manage applications area of your phone and move it manually every time, which I had to do.
After all this, your phone should be running faster than before as I know mine did.
I would also suggest not using any kind of app killer or battery manager. I was using Android Booster and Advanced Task Killer after I did all this and the phone was being pretty buggy. After I deleted these apps the phone has been WAY more stable, and battery life has not changed to my knowledge.
I am also using Milestone Overclock as 1ghz with 59 vsel which helps with the performance A LOT!!!
Hope this helps.
