I'm running a Jailbreaked (Jailbroken?) 3G on 4.2.1 (8C148) BB 05.15.04 and other than the inability to tether, it runs fine.
My battery life and overall performance is a little better than when I was running 3.1.3 and JBd with Blackra1n
Unless you have a need to tether you iPhone to a laptop/notebook or other device for 3G, 4.2.1 is fine and can be JBd with Redsn0w.
And soon, tethering will be made available for 4.2.1 jailbreaks.
I'm going to upgrade to an iPhone 5 this summer, but only if they support Flash.
Otherwise, I'll look at other smart phones.
The lack of Flash is unacceptable and Apple and Adobe need to stop acting so childish and just make it happen.
If they don't implement Flash, other smart phones will make the iPhone look like a Dinosaur soon.