[Droid Incredible Q&A, Help & Troubleshooting] NYC Coyote:
Ok....from what I can piece together these are the steps necessary to Root...Put the normal recovery back on....apply the OTA...and then put Clockwork back on. Please correct if I'm wrong (by all means..I want confirmation of this before I do it) (big thanks to k.electron from whom I copied / pasted most of this)

New Edit:

This process is for people with a fully stock phone who want to apply the stock 2.2 update and maintain root.

I just went through this process.

(sd card must be formatted to fat32. without that most of this will fail.)

Step 1 - ROOT 2.1.22.605.2: do this -> http://unrevoked.com/recovery/

(this will root your phone and flash clockworkmod recovery.)

Step 2 - S-OFF: do this -> http://unrevoked.com/forever/

(this will use clockworkmod recovery to permanently unlock the nand, also known as s-off.)

-- To backup apps that you want after the phone is fully updated at this point download titanium backup and backup whatever apps u need. make sure u take the backup folder from the sd card and store it on ur pc for later use.

Step 3 - PUT STOCK RECOVERY BACK: do this -> http://xdaforums.com/showthread.php?t=756850

(put into sd card and hboot apply [to enter hboot turn off phone then hold vol down and power till hboot appears])

(this will restore the recovery back to stock as it is needed for the RUU)

now u have an s-off phone with everything else stock.

Step 4 - APPLY OTA: Grab this file: http://android.clients.google.com/p...on_WWE_3.21.605.1_1.22.605.2_release_sign.zip

rename it to UPDATE.ZIP

-Drop the update.zip provided at the bottom of the page on to the Root of your SD card.

- Turn your phone off.

- Press and hold the Volume Down and Power at the same time to boot into HBOOT.

-

When the white HBOOT screen appears, use the volume button to move down to “RECOVERY.”

- Press the Power button to select “RECOVERY.”

- When the triangle and exclamation appears, hold the Volume Up and Power button at the same time.

- Using the volume button, scroll down to “apply sdcard:update.zip” and select it.

-Your phone should update now, but it will take some time

Step 5: get recovery here http://downloads.unrevoked.com/forever/recovery/clockworkmod/PB31IMG.ZIP

put in sd card and hboot apply

(this will load clockworkmod recovery on your phone so that u can apply updates.)

Step 6: put in sd card -> http://xdaforums.com/attachment.php?attachmentid=388592&d=1282834695

and

http://bit.ly/su234ef

and use recovery to install both those zips.

(clockworkmod recovery allows u to apply .zip files, use that option to do this.)

(this will re-root the newly updated phone and install the superuser.apk.)

congratulations now u have an OTA 2.2 phone with root.

-- If you had titanium backups you want to restore, paste the folder u saved on the desktop back here, re-install titanium from the market and restore apps. It is recommended to redownload the app from the market and just restore the data for the app if possible.

Note: Titanium is probably going to tell u that it couldnt get root. that is because busybox is missing. hit the problems button on titanium and upgrade busybox. this will upgrade busybox if ur using an older version, or download the right version if u dont have one. this should take care of all busybox needs.

notes:

* to enter hboot turn off phone then hold vol down and power till hboot appears.

* to enter recovery, enter hboot and select recovery.

* to check if nand is unlocked, hboot must read S-OFF

* you only need stock recovery to load the RUU, so if you have flashed a different rom, simply revert to the stock recovery and apply the RUU

* all links are property of their original creators, thanks to all of them.

And remember....as has been said before. Make love multiple times during the process.