So I thought I would share my fun little adventure over the last 2 days in hope it might help some judging by the post's I had to read to find this. I upgraded to stock 4.3.1 and then jailbroke with redsn0w 0.9.6rc9. Everything worked great, but pwntunes and a few other apps made it worth to downgrade. I soon found that this would be a bit more difficult with a baseband of 05.16.02. I was able to with the following;

-downgrade to 4.0.1
-run redsn0w 0.9.7b6, select IPSW for 4.2.1 (this was on accident, but ended up working)
-in redsn0w make sure to select install iPad baseband and allow redsn0w to complete.
-you should now have a baseband of 06.15.00
-I then upgraded to 4.2.1 and got the error 1015
-run recboot exit only, and as soon as it reboots, Hold power and home for 12 seconds, then release the power button and hold the home button for 12 seconds.
-run greenpois0n, this should reboot the phone into 4.2.1
-Run greenpois0n again to jailbreak.
-restore iPhone with last backup in iTunes and you should be done... (at least I was, my restore is done, and first sync is running currently)

I have to say, half of this was just plain dumb luck and several times I was pretty sure I was jacked something up pretty well. I can in no way promise this will work for any other phone then mine, but I thought I'd share. I didn't see some of this in other threads. Best of luck to those with any issues.