New iPhone Owner- Updating & Re-Jailbreaking help

I recently bought an iPhone (that's not 3g, although I'm unsure to the difference between a 1g and 2g and which one it is). It's jailbroken and has an older firmware version. It's got Cydia and Installer, and some stuff from the old owner which I don't want. iTunes 8 asks me to update to 2.1, which I want to do but haven't because it would un-jailbreak my phone.

So what I'm asking is, how do I update to the latest jailbreak-able firmware, jailbreak this frimware and remove all the media in the process? I don't want anything non-factory other than Cydia and Installer. I'm a PC user. Could someone link me to some well-written newbie friendly guides? Thanks!

I also thought I'd mention that I've got a TurboSim, and as far as I understand this means that unlocking is hardware dependant and nothing I do to the phone can un-unlock it.

TL;DR- I want to update to the latest firmware and jailbreak my non-3g iPhone using a PC. How do I do this?

I meant that when I'm done with the process I would like to start with a "clean" install of the latest jailbroken firmware, ie one you would get if you bought the phone, upgraded firmware, and then jailbroke through the most direct route, which to the best of my knowledge involves installing Cydia and Installer. Of course, after that I'll install apps and stuff. Thanks for the links, I'll check them out.

Edit: Isn't 2.5 beta for QuickPwn out and inluded in Winpwn? Also, do I need to unlock if I have TurboSim?

I've got WinPwn and I'm almost ready to update and jailbreak, but;

I've got a TurboSim for later but don't have a SIM card in my phone right now. What settings do I select when it asks if I want to unlock/activate/youtube activate my phone?

WTF is partition size and why does the guide (http://www.iclarified.com/entry/index.php?enid=1755) recommend to change it to 800mb?