I have written up this quick guide to clear up some confusion. Many people with locked 1.1.1 iPhones on AT&T have had the misconception that they must downgrade to 1.0.2 and virginize their phones and then jailbreak up to 1.1.1.
This is not the case. If you have a locked AT&T iPhone running 1.1.1 firmware you can just use iJailbreak for iPhone to jailbreak. Although this is extremely easy to do I have made a quick guide Here is the guide. Sorry windows users, this is OS X only. As soon as someone buys me a nice PC I'll write some windows guides .
I hope this clears up any confusion and those with locked 1.1.1 AT&T iPhones don't go through unnecessary steps.