Need Someone that actually knows what they talking about :)

[i.Annie]

Just enter pwned DFU mode with redsn0w (not jb it) and restore to custom fw like x98car said

You'll need SHSHs to get to 4.1

[tisiphone]

thanks I.Annie
I used redsn0w 0.9.6b2 and 0.8 and they both said
"Unable to recognize specified IPSW" when i pointed it to the
sn0wbreeze IPSW. any suggestions?

[i.Annie]

You'd want 0.9.6b6

[MrDublin]

The other thing is with Redsn0w you need to point it to the official IPSW, not the sn0wbreeze IPSW.

[tisiphone]

Thanks MrDublin & everyone else it worked - TOUCHDOWN!! I'm on 4.1, kept my baseband 5.11.07 and i'm unlocked for Tmobile so i'm a happy camper

For anyone else reading this and wanting to know how i got there here are the steps:
1). Used sn0wbreeze to create a custom ipsw (see 1st replies to this thread for links & tutorial)
2. Used redsn0w 0.9.6b6. When prompted for an ipsw i used an official Apple one iPhone2,1_4.1_8B117_Restore.ipsw (google it) and then selected the option to just go into DFU mode.
3. Once that was done, used itunes to restore the iphone and pointed it to the sn0wbreeze custom ipsw i created earlier. All done - it was jailbroken.
4. To unlock - went into cydia, manage sources, repo666 (already on my phone) and downloaded the ultrasn0w package. Installed it (without sim card and 3g turned off- was told this made a difference),it restarted and VOILA it's unlocked Very simple IF u know what ur doing...which i didn't of course. Good luck!

[MrDublin]

Glad to hear it's working. Good Job.