I have been using my iPhone (1.0.2) with iTunes (7.4.1(2)) for a
while. I jailbroke the phone and added a number of third party
applications through installer.app.

I decided to upgrade my iPhone to 1.1.1. I downloaded the firmware
file "iPhone1,1_1.1.1_3A109a_Restore.ipsw" and placed it in
~/library/itunes/iphone software updates. I also have the 1.1.2 and
1.1.3 firmware files in the same folder.

The problem is -- I can't figure out how to upgrade the firmware to 1.1.1.

I attempted to just "restore" my iPhone to 1.1.1 however, that does not work.

I also attempted to upgrade using the "Check for Update" button.
When I select that button, it says "This version of the iPhone
software (1.0.2) is the current version." When I select that button
while holding the "option" key, I can select the 1.1.1 firmware file.
When I attempt to use the 1.1.1 firmware file, it says "Preparing
iPhone for software update" and then I get the following error message
"the iPhone "iPhone" could not be updated. An unknown error occurred
(1)."

As a result of this error, I now have an unjailbroken iPhone running 1.0.2.

Any suggestions on how to avoid the error message and successfully
upgrade to 1.1.1?

Thank you very much