Android Community is hearing from multiple T-Mobile G1 users that Android 1.5 “Cupcake” is being pushed out as an OTA upgrade.  The system update, which was released officially to developers earlier this week, will be rolled out to handsets throughout May, according to one report.

Cupcake 1.5 brings with it an on-screen QWERTY keyboard, necessary for the new breed of Android devices which lack hardware keyboards, such as the HTC Magic and Samsung I7500 (which will have the new version out of the box).  Other improvements include direct photo and video uploads to Picasa and YouTube, respectively, together with various behind-the-scenes improvements such as faster browsing courtesy of new JavaScript and webkit engines.  Video demo here.

Reports are telling us that the update is reaching users in the US and Europe.  The Android 1.5 system update is a 44MB file, and as yet there’s no way to artificially trigger its download, only wait for your carrier to push it OTA.  Keep track of progress in this forum thread.