Some alternatives do exist but are not very good or are Compact Framework application (not a very good idea for background application).

AutoLight is supposed to be a better implementation for the auto adjust backlight function.

Requirements and compatibility:
AutoLight was developed for HTC Topaz (Diamond 2) with WM6.1 and it critically depends on HTCSensorSDK.dll, HTCUtil.dll and on a 10 levels backlight starting from value 1.

It has been reported to work on Rhodium (Touch Pro 2) and it might works on some other HTC phone but the test is up to you. I do not think it can work on non-HTC phones.

AutoLight is a native application with a very low memory usage. On the other hand the Configurator requires Compact Framework 2 but it should be closed after the use.

The Configurator is designed for WVGA screens.

Install:
Run AutoLight.cab and install in main memory (not in storage card), run AutoLight.Config.cab and install where you like, then softreset (this should also disable the native auto adjust backlight function, check for that in the Control Panel Power applet).

If you have previously installed autolight V2.x and want only upgrade to V2.3 without having your configuration reset to default use the Configurator to stop AutoLight. After that overwrite AutoLight.exe, ChangeLight.exe and AutoLightConfig.exe with the files you find inside AutoLight.zip and softreset.

Uninstall:
To uninstall AutoLight use the Configurator to stop it, then use Remove Programs in Settings.
AutoLight can be also be stopped running the AutoLightStop utility.
To uninstall AutoLight Configurator use Remove Programs in Settings.

Configurator:
AutoLight working depends on parameters it gets from registry. For details on parameters see ReadMe.txt, AutoLight.reg.txt and AutoLight.reg.

The Configurator gives a more user friendly access to these parameters. Nevertheless, the configuration process is quite complex and should be done after thoroughly reading AutoLight.reg.txt.

The second tab of the Configurator contains a graphical representation of the calibration table used to convert light sensor to backlight values. Note that:
- The horizontal scale is not linear but goes according to square root of the light sensor value.
- The horizontal red segments represent the ranges of light sensor values assigned to every backlight level.
- The horizontal red segment whose backlight level is selected (with the control on top of the second tab) turns blue.
- The small rectangles connecting the segments are the hysteresis.
- The vertical blue line is the current light sensor value (only available when AutoLight is running).
- The horizontal blue line is the current backlight level (only available when AutoLight is running).

User offset change and increment/decrement backlight command line utility:
If you are not satisfied with the backlight level as computed by AutoLight you can add a positive or negative offset to it. The offset values, one for use when on battery and one for use when on AC power, can be entered using the Configurator.

Moreover, installation puts the small utility ChangeLight.exe together with AutoLight.exe. Running ChangeLight.exe with parameter "/-" decrements backlight level by one, with parameter "/+" increments backlight level by one. The utility then adjusts current offset level accordingly. Using ChangeLight.exe and a hardware button mapper you can change backlight and offset without using the stylus.

If you do not use ChangeLight.exe you can safely delete it.

More screenshots here.

Update Description:
v2.3 (14-09-2009):
- New lower backlight default calibration.
- Offset CPL option removed due to induced instability at high light levels.
- Minor fixes.

v2.2 (06-09-2009):
- Application exception list by window title OR class name.
- Minor fixes.

v2.1 (01-09-2009):
- Fix for adding applications with Configurator.

v2.0 (01-09-2009):
- Configurator application added.
- Increment/decrement backlight command line utility added.
- Better default values for calibration table.
- Minor fixes.

v1.3 (22-08-2009):
- User changeable backlight offset.

v1.2.1 (21-08-2009):
- Uninstall procedure correction.
- Minor fixes.

v1.2 (20-08-2009):
- Better backlight stability.
- No more backlight instability on power on.

v1.1.1 (17-08-2009):
- Value of SampleN registry value changed from 10 to 12.

v1.1 (16-08-2009):
- Added change backlight for different applications capability (OverrideWindows registry value).

v1.0 (15-08-2009):
- First public release.