I want to try this process before I mess something up and actually need it. I'm assuming this wipes your system clean (contacts, texts, accounts)? If I backed up with clockworkmod, can I do this and just restore the backup so my system is in it's original state? I'm new...I know.
Depends.
YES: If you create a 2.1 nandroid with CWM, you can flash the SBF to return to a stock .604 setup, reinstall CWM, and restore the nandroid backup with no problem.
NO: If you create a 2.2 nandroid with CWM, flash the SBF to return to stock .604, you will not be able to use said 2.2 nandroid unless you update to 2.2 again and reinstall CWM.
That covers the back-up question. As for the SBF wiping all of your system data, yes. HOWEVER, if you are coming from 2.2 and flashing the SBF to return to 2.1, you will be stuck in a bootloop--but it is easily solved. After the SBF flashes successfully, the phone reboots itself. You need to pull the battery and then boot into recovery. From there, you wipe data/factory reset, then reboot. The phone will boot up normally, naked as the day it was born.
NICE tip .... definitely going into my stack of stuff...