I originally had this problem with PwnageTool 1.0 All it took was to redownload and reinstall the tool to fix it. Now, with PwnageTool 1.1 I get the same error: "Update Baseband Failed" during creating custom IPSW Firmware.

I've closed the tool, deleted "com.devteam.pwnagetool.plist" in ~/Library/Preferences, and retried. Also, I've tried restarting. As long as I do not select the "Update Baseband" option in IPSW Builder it builds the custom IPSW fine. The console log shows a repeated error:
"4/15/08 1:02:10 AM com.apple.KernelEventAgent[57] KernelEventAgent: sysctl_statfs: Operation not supported on socket"

Any ideas?

Resolved!
After going almost a week with nothing found to fix this issue, today I decided to re-download the tools and re-install one last time. Apparently, the Dev Team must have fixed something in the tool to fix my problem, because it now works effortlessly.