Here are the steps:

1) Make sure you have a copy of the 1.0.2 firmware handy and decrypted
2) Reboot iPhone holding top (power) and home buttons *BUT* release the top button 10 seconds into it (right after the screen goes dark)
3) The iPhone screen will appear to be off, but start iTunes (latest version worked for me on the Mac)
4) Option+Click restore and select the 1.0.2 firmware ipsw
5) The phone will restart and error out at the end, this is expected
6) Shutdown iTunes
7) Launch the latest iNDpendence
8) Jailbreak the phone using a decrypted 1.0.2 (it will flash all sorts of error, but stick with it)
9) Activate the phone
10) It will show the SIM error but you should be able to get back in

I know that you might not want to do this over again, but if you took a video and do this again, you'll be a hero rather than having people doubt you.

X2

You can be the next GeoHot

Hey man, nice going with the new fix. Sorry that everyone on here douted you.

Thanks for the fix!

Cheers!

A couple of people have confirmed this working on the MacRumors forums, so this seems real:

http://forums.macrumors.com/showthread.php?p=4260215

Confirmed to work!! well done KMAC! I have hardware unlocked 1.02, upgraded to 1.1.1.. then downgraded using KMAC method and it works!

now i have 1.02 OS with 4.01.03 modem firmware.. with "incorrect sim" shown.. the phone is locked again i think...wifi works...I will flash back the 3.14.03 modem firmware now

update- no go with firmware 3.14..it wont accept

Thanks Kmac! This totally works. To all you nay sayers... if you don't believe it, don't try it! ;-)

I thought I'd add my personal experience with this. It took me several hours and multiple attempts to actually get this to work. Perhaps this will help someone if they are running into similar things.

By the way, this was the state of my system and phone:
1) Latest iTunes
2) I upgraded my phone to 1.1.1 a few days ago
3) Prior to upgrading, I had a jailbroken phone with native apps installed, but I never messed around with the SIM unlocking stuff -- I've had AT&T service for 10 years, so I used the "Apple/AT&T approved" way of activating my phone.
4) I tried several times to downgrade the firmware and was always able to restore to 1.1.1 after the phone got hosed in the attempt. It never bricked or anything.
5) I plugged my phone into the computer without using the dock (this might not mean anything; just trying to be complete...)

This step took me a while to get right.

This is what I did:
1) Held down power and home buttons
2) Got the power-off slider screen after about 5 seconds
3) Continued holding down power and home
4) Waited maybe 3 or 4 seconds more
5) Released power, but kept home HELD DOWN

At this point, RELEASE the home button.

I had to try this a few times before it actually worked. I read a couple things around the internet about people having to switch the port into which their USB cable was connected in order for a firmware update to work. I tried that; I don't know if that actually caused it to work, but it's something you might want to try.

Ok, I'm a little hazy on what I did here... I think I reconnected to iTunes to re-activate the phone (recall that I initially activated using the Apple/AT&T approved method), quit iTunes, ran iNDependence, and was able to jailbreak without ANY errors.

I didn't get this error either...


One more notable thing: After I completed the jailbreak, at some point I think I rebooted the phone and iTunes came up again. It said "this phone has already been synced to this computer. Restore?" or something like that. Instead of restoring, I clicked the "Activate as new phone" button. This didn't actually require me to sign up for service again -- it just didn't copy all the old files back onto the phone. I think the real activation info is stored on the SIM. At some point, iTunes recognizes this and knows you have a working, activated phone.

Anyway, I did have to re-sync all my addresses, phone numbers, etc. from scratch.

So... a bit of a hack.... but, that's why that call it a "hack." ;-)

I can confirm that it works. Thanks again, KMac! You sure have some patience to have figured this out! :-)

-vfxdude2

Did you checked the baseband? Which version is it? Does the phone part works?

__________________
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I'm having a very basic problem, and I'm starting to feel like the dorks with stupid problems that I laugh at when trolling here....

No matter what I do, I cnnot get my mac to recognize the iPhone after restarting. I'm holding down the Power+Home buttons, when the screen goes black I'm letting go of the power and keep holding the home .... and keep holding .... and keep holding. Nothing happens even after 30 seconds.

I must be missing something really really easy, any ideas? I want my iPhone back!

/edit: nevermind! turns out I was letting go of the power button a few seconds too early after the screen went blank!

First, thanks KMAC, I've been trying to figure out a way to get back to 1.0.2 for two days straight. I just wanted to toss in my experiences.

I did NOT end up having to Jailbreak my phone. I performed the restore as directed, got the error in iTunes, force quit iTunes. Then I launched iNdependence, it tried to connect to my iPhone, but it gave an error, saying something about pairing being incorrect. Then, my iPhone came to life, iTunes auto-launched like it always does, and my iPhone said it was already activated and allowed me to restore my contacts and music without complaint.

So I was able to downgrade to 1.0.2 without having to use iNdepdence to jailbreak or activate it first - maybe it's something iNdependence does while it's trying to connect that fixes the restore?