When trying to pwn a unactivated iphone (unactivated meaning, its still at the new out of box or freshly restored status of slide for emergency calls screen)

I want to install custom 3.1.2 firmware, which is jailbroken, unlocked, etc...

There is no option for update or restore - since it is UNACTIVATED still. I tried entering DFU mode and shift-restoring, results in error 1600.

The work around for me has been (on 2G's) to downgrade to 3.0.1 on another pc with itunes 8, redsn0w it, then connect the hacktivated 3.0.1 iphone 2g to a machine with itunes 9 and shift restore (no dfu mode) to custom firmware. IS THIS THE ONLY WAY?

i have exactly the same problem and used exatly the same methods.

but this one i just cannot find a solution to...

pleeease help someone!!!

For 3GS iPhones, you generally need to get the iPhone jailbroken once only, with either redsn0w (if it was running OS 3.0) or blackra1n (if it is running 3.1.x) before you can load a custom ipsw from pwnagetool.

The one exception is that on the Mac, Pwnagetool 3.1.4 has new support for jailbreaking 3GS iPhones running 3.1 and 3.1.2 even if they have never been jailbroken before. You need to quit iTunes and iTunes Helper and answer no to the question "has your iPhone been pwned before" at the end of the pwnagetool wizard. As this feature is built into the pwnagetool program not the custom ipsw that pwnagetool makes, this feature only works on a mac.

The jailbreak for the 3GS is at the recovery mode level not the DFU mode and forcing the iPhone into recovery mode should remove the "activate your phone" prompt when you plug the iPhone into your computer.
Have you tried forcing the iPhone into recovery mode rather than DFU mode. The steps are explained in this howto (says 2G and 3G but is the same for 3GS)

http://www.hackint0sh.org/f137/54082.htm

There are some complexities with jailbreak on the very latest 3GS iPhones which have a hardware fix that means they can't be permanently jailbroken and need to be kickstarted using blackra1n each time they are booted otherwise they will hang at the apple logo. These will have digits 4 and 5 have a value of 40 or higher, this is the week of manufacture.