You cannot rejailbreak on this already jailbroken iphone. You have to do a restore and jailbreak again. When you do a restore, everything willl be wiped out.
Backup for app store apps and music, simply sync. Make sure to right-click device and use "transfer purchases" before syncing. Contacts, go to info tab and select "windows address book" (or whatever your choice is if you use Google or Yahoo) and sync your phone contacts into your computer. For Cydia apps, back up with Pkgbackup. Saves as contacts so when you sync contacts, you can avoid restoring from backup which can cause problems. Set your phone up as new. Simply syncing will restore your stuff. For Cydia apps after restore, simply download Pkgbackup again and sync to iTunes to regain your Cydia apps.
All easy to follw and makes sence but how do i set phone as new without itunes upgrading to 4.2 ??
and how ill I format or erase all contents without itunes asking to upgrade?
System restore usually upgrades via itunes.
You would restore to 4.1 but only if you have SHSHs for it saved. If you don't have them, you can't restore. You will have to upgrade to 4.2.1. If you don't want to upgrade to 4.2.1, then you'll have to stay with what you've got.
Check for those SHSHs in Cydia and in TinyUmbrella.