SOLUTION!!!! Step 1
Download: make_noerase_ipsw_r1.exe Step 2
Drag n Drop YOUR CURRENT VERSION (any version works, 3.x, 4.x, even 5.x) onto the program, and wait till it makes the UPG_blah_blah.ipsw file Step 3
Put your iDevice into "PwndDFU Mode" using: iREB Step 4
Download: TinyUmbrella Step 5
Run TinyUmbrella & press the: "TSS Server" button
(MAKE SURE TO CHECK THE LOG TAB IF YOU GET A WARNING SAYING "CANNOT START TSS SERVER", you have to end all conflicting tasks)
Open iTunes and your iDevice will show up to restore, hold SHIFT and click on Restore & choose the UPG_blah_blah.ipsw file
Your phone will restore about half way, don't worry you won't loose any thing. You will get "iTunes Error (1013)" Step 8
Press OK, close iTunes; Turn Off the TSS Server & close TinyUmbrella. Step 9
Download redsn0w for your device.
DO NOT, AND I REPEAT: DO NOT HAVE CYDIA CHECKED!!!
YOU WILL MESS UP YOUR JAILBROKEN STATE & HAVE TO DO A FULL RESTORE ANYWAYS!!!
Enter normal DFU mode & just jailbreak your device, pointing to the FACTORY ipsw for your current firmware, NOT the UPG_blah_blah.ipsw file.
DO NOT CLOSE redsn0w EVEN IF IT SAYS: "THE REST OF THIS PROCESS TAKES PLACE ON YOUR DEVICE"
And that's it. Enjoy your phone, out of boot loop WITH ALL OF YOUR APPS, MUSIC, CONTACTS, PICTURES, SETTINGS & MOVIES, NOTES, JAILBROKEN TWEAKS, ETC