I had this same problem, it's very easily solved. I think it's because the default path on 1.1.1 ipods isn't the same as on the 1.1.2 ipods, so iBrickr treats the two differently. This is all just a theory, though, but it makes sense. I'm not a hacker, and I don't know for sure, but the evidence I have to support this guess is that the normal configuration for the 1.1.3 soft upgrade is that the .bin image is placed in the /var/root/Media/softupgrade/ folder. Sometimes, like what you're describing, if you SSH into the iPod, you'll notice that it was instead placed in /var/root/Media/var/root/Media/softupgrade/ . In essence, the file's there, but it's in the wrong place. So now that you know what's wrong, let's fix it.
1) SSH or iBrickr into your iPod. Remember that it should be at 1.1.1 (like the problem states) and after you did the 1.1.3 upgrade iBrickr process on it.
2) Navigate to /var/root/Media/ and create a folder there called "softupgrade" without the quotes.
3) Now, on your actual computer (not the SSH session), find the folder you unzipped the 1.1.3 jailbreak special edition zip file to. You should find a file called 113_upgrade_image.bin. Copy that file to the /var/root/Media/softupgrade folder we created in the last step.
4) Reboot the iPod. That means hold down the sleep and home buttons until it turns off, then briefly press the sleep button again to turn it back on.
5) Go to Installer, and under "All Packages" you should see 1.1.3 soft upgrade. If you don't see it, proceed to the end of this post for directions. If you do, go ahead and install it. The status bar should pause around halfway for a while. This is normal. Don't touch the iPod, just let it do its thing. After a while it should reboot by itself. Voila! A jailbroken 1.1.3 iPod Touch.
IF YOU DIDN'T SEE THE "1.1.3 soft upgrade" package in Installer:
Make sure you have the latest Community Sources installed and try again.
