are not dl'ing. Using Wifi and tried to install Facebook from app store, and install an app with Cydia. The FB app from app store is on the screen in "waiting" mode and the Cydia source is stuck on the Updating sources screen and says Downloading release at the bottom with the progress bar 99-100% full
That might very well be the culprit. Selecting activate creates some problems. If you've got an official carrier's SIM you should not select activate this time when creating a new custom fw. Then restore to it and activate in iTunes with the SIM.
If you don't have a SIM, I'd suggest getting one or just trying to build a new fw and trying again. But the best thing to do is to get that SIM.
You should create a new custom fw for 4.1 in Sn0wbreeze. Run expert mode and deselect activate (you don't want it selected). Then create your custom fw etc, do the usual shift+restore to your custom fw in iTunes.
After it finishes, it should take you to the emergency call screen. Then stick in the AT&T SIM, plug into iTunes and activate the phone. Then you should have access to your springboard and you'll be jb on 4.1.
This will not screw up the ATT SIM? (this is a SIM being used in another iPhone by a friend and I don't want to mess that up.) Also, after activated just insert the T-Mobile SIM and it should work?