After a huge amount of effort and in-situ experimentation with iBoot (basically a binary massive binary search through the code, disabling some functions to see if I could figure out why my LCD driver wasn't working properly), I managed to get it fully working. The problem was two-fold: first, I forgot to write the first and last bytes of my gamma tables: oops, but easily fixed. The second problem was that apparently iBoot changes the SDIV of the clock in the middle of the initialization process. I'm not even sure yet how many devices the change in clock frequency affects. It certainly affected the LCD, because before there was all sorts of flickering scanline weirdness as one would expect from a misconfigured clock.
Anyway, I reversed the routine that changed the SDIV and implemented it. Seems to work fine now. It's been ages since I looked into the clock speed stuff (pretty much right when I first started this) so I can't say for certain, but I'm pretty sure doing this increases the clock speed (which would make sense).
The LCD driver worked after those fixes and I went onto write a simple framebuffer in a couple of hours, so we can finally get text-mode output on the iPhone screen. It was pretty important to me to get the screen working because even if we can boot a kernel, I wanted the layman to feel like a full-fledged OS was running on the device, and that means display and I/O of some sort.
For a final hurrah, I also wrote some code that lets us detect when the physical buttons (Home, Hold, etc.) were being pressed down. From these pieces, it will be possible to construct a graphical boot menu controlled by those buttons. You could have one option to boot into the iPhone OS, and one option to go into openiboot command-line mode with that text-mode display.
The photo I posted is the current development snapshot running on a first generation iPhone, with oibc (openiboot client) connected and running on my desktop computer. If you have a 2G iPhone or a first-gen iPod touch, you can try it out yourself by checking out the code from Github and compiling it (It's only designed to be built on a Linux machine. You'll be missing some Linux headers otherwise). I wrote some basic notes on how to get it running inside the source tree, but this is not something you're expected to work with unless you're a fairly experience programmer yourself.
