Downgrade to 1.1.1+OkToPrep+OptionKey & press update+select 1.1.2 firmware & NO INS..

the same thing happened to me. I couldn't get it to upgrade to 1.1.2 right.

i just ended up restoring to 1.1.3

I'm hoping maybe they'll be an even easier way to jailbreak 1.1.3 sometime soon

the reason for that is that you guys are probably using itunes 7.6. It has been reported that somehow this version of itunes breaks the octoprep. The solution? Use itunes 7.5 or some version before .5 (note, i've read that it's difficult to downgrade from 7.6 to .5 on a mac, I suggest to get a 7.5 version and do the whole process in a windows machine)