Step 1) Download iTunes 9.2 version
Step 2) Plug in the iPhone to PC/Mac
Step 3) Put the iPhone in DFU mode (MUST BE IN TRUE DFU MODE) Screen should be black but still be showing up in itunes with a warning iPhone is detected in recovery mode
Step 4) Download a legit version of an older ipsw from apple untouched (NOT A HACKED VERSION A LIGET NORMAL FIRMWARE UPDATE like 3.1.2)
Step 5) Option- click-restore on MAC, or Shift-click-restore on WIN for iPhone and select the Legit Apple firmware 3.1.2 you downloaded in step 4.
Step 6) Watch how Apple confirms that its legit Firmware your trying to restore to on their servers, (HAHA cause its Legit software from Apple so why wouldnt they let you DOWN Grade to it) The Firmware then gets applied to your iPhone watch as the progress bar moves across and no error pop up.
Step 7) Success! You just took your iPhone3Gs from iOS4 to 3.1.2 Firmware!!!
Although I've been trying to restore my 3G to sell to a friend with the 3.1.3 software and it fails with an error (1015 unknown error I think) everytime. Bit annoying. Looks like IOS4 is there to stay. :-(