Success after many trials and tribulations - my story if it helps
I upgraded from 1.1.1 to 2.2.1. I first tried using just pwnage using the 2.2.1 restore package and did this most of the day but kept getting error 1600 and iTunes had problems recognizing it. It would say something like "error device not recognized" after pwnage put the phone in DFU mode. When I would bring it back to DFU iTunes would go to recovery but after extracting the package would generate error 1600. This happened regardless of whether I tried to recover from DFU or normal restore and happened across a myriad of packages from 2.0 to 2.2.1. So, finally I used quickpwn to jailbreak the phone. This went without a hitch. I then tried pwnage again. When pwnage put the phone in DFU I once again got the "not recognized" error. When I put the phone back in DFU I once again got the 1600 error. However, after I put the phone in normal restore mode and tried to restore the custom package created by pwnage, it finally worked! This went without a hitch and I now have a jailbroken, unlocked, activated phone.