Thanks to a great find by KMAC, WE ARE NOW ABLE TO DOWNGRADE OUR PHONES!!!! I just wanted to make a simple guide for people with PC's to follow

Start iTunes and plug in your 1.1.1 phone

In 1.1.1, hold Power and Home buttons and count 10 seconds (your phone will turn off, just keep counting), release the power button but continue to hold the home button until your phone is recognized by iTunes. (phone screen will be blank)

A message will pop up and ask you to restore your iPhone. Holding down the SHIFT key, click on the restore button. Navigate to your 1.0.2 software
(http://appldnld.apple.com.edgesuite....8_Restore.ipsw)

Begin restoring...

When it's done, you will get an ERROR, click OK. Your phone should show a yellow triangle. Leave iTunes running and run AppTap.

AppTap might encounter an error as well, however, it will bring your phone to the Activation screen. Once again, start iTunes, ignore all messages from it, and run AppTap. Now it will jailbreak your phone and install Installer. (You may have to retsart your PC after arriving at the activation screen if iTunes isn't recognizing your phone)

Simply use iASign or whatever you use to bypass activation.

Your phone is now back to 1.0.2.

(I am using iTunes 7.4.3.1)

WI-FI, calls, everything fully functional!

EDIT:

amnesia created a youtube video to further clarify things:
http://youtube.com/watch?v=FE85O8zdTTs

wait, this isnt confirmed yet for ootb 1.1.1 fw iphones , is it??

Correct.

Anybody with an OTB 1.1.1 iPhone, please feel free to chime in.

I can confirm the downgrade portion works for phone updated from 1.0.2 to 1.1.1. No word on out-of-the-box 1.1.1 yet. Working on the rest of the process...

Working on pictures for anyone interested.

Not yet.

Someone try it! If It works i'm heading down south to pick one up

hahahahahah!!

Apple-1 Open Source-2

We win!

I was just starting to enjoy the peace of tranquility of not having a working phone....hahahhaha

Not anymore...Let the war begin!

yeah but you know some techie at apple is viewing the thread right now and they will start work to stop us.....why must they try so hard, so what if we unlock them, they are still selling them!

Ok, iASign isn't working right, any ideas?

So far, I've got my phone down to 1.0.2 from upgraded 1.1.1, but the IMEI still is the 0049 default. Anyone have any ideas?

Perhaps you can regenerate a certificate using the new IMEI #?

https://ookoo.org/iphone/iasign.php