well here we go
first off yes you will loose all your data on the iphone! but there should be a backup file created under itunes. so once you connect the new 1.1.4 phone to itunes it will put all pics/calendar/contacts/music/videos/.. back on there. so if there is any other data that will be lost -->like all the apps that you put on your phone since jailbreaking 1.1.2
personally there are two methods right now that are both quiet easy but I am hearing more and more issues from the pwnage tool with BSD loop issues so I would suggest getting your phone updated via Option restore and restoring your phone to the new firmware. once you have completed that step put the phone into DFU/restore mode (hold power and home button for 10 seconds till you see the apple logo then let go of the power button and hold the home button for another 15 secs - seriously count 1 mississippi..2 Mississippi) the start up ZiPhone and depending on your carrier do either a Jailbreak for iphone for ATT users or you can do the jailbreak/unlock/free button on the top to take care of the whole process. cant get any easier
Good Luck