I've an HTC Magic Developer Phone running Android 1.6. I want to upgrade it to Android 2.1. Please guide me how to do this.
If your phone is actually a developer phone supplied through Google (and not a consumer phone bought through a phone company) then you've actually got an ADP2, not a Magic, beware of that when looking for ROMs as they are some subtle differences in the hardware.
Official ADP2 images are hosted by HTC at http://developer.htc.com/ but only up to Android 1.6 for ADP1 and ADP2.
If you do actually have an HTC Magic (aka mytouch 3G) then depending on your phone company there are official Froyo releases for the Magic which have been pushed out OTA by some phone companies, see this previous question for more info When will my phone get the Android 2.2 update (FroYo)?. If going for unofficial ROMs then be careful again as there are (at least) two hardware variants of this with incompatible ROMs, the Magic A, and Magic B.