Don't upgrade yet. I used limera1n to jailbreak and then ultrasnow to unlock my iphone 4. I am using it on T-Mobile as we speak.
I jailbroke and unlocked a 3gs for a friend. He then sold the phone to me, but not before he upgraded to 4.1. I have jailbroke but it is still locked as there is no unlock for it..
I have a similiar question. I have a 3gs with 4.1 and the latestest baseband 5.14.12.
I have not updated to 4.2.1 and the latest baseband. But it looks like from the tweets it will be unlockable. Should I upgrade to the latest and then jail brake and unlock.
You can jailbreak iOS 4.1 and keep baseband 01.59.00 if you use pwnagetool 4.1. Use pwnagetool to build the custom 4.1 firmware and it will preserve your baseband. Then you can use ultrasn0w to unlock through cydia.