I just went through the nightmare of upgrading from 1.0.2 to 1.1.2.
MASSIVE NIGHTMARE...
When you load the new firmware - doesn't like the new baseband on it.
You will have to keep going to 1.1.2 unless you downgrade the baseband.
I used this site:
http://www.hackthatphone.com
When you update to 1.1.1, you will get an error, then use iNdependence to get it out of restore mode. Then jailbreak, unlock using the new anySIM for the 1.1.2 baseband, then download that okto program, then back up to 1.1.2 then jailbreak that.
I couldn't get the new jailbreak 1.1.2 to work - puts the iPhone into restore mode, so afterwards I had to use iNdependence. I loss the AppInstaller program... at least it's unlocked...
Once you go to 1.1.2, you have that baseband that won't work with 1.1.1 (I tried it) - you either have to downgrade the baseband (see what that site says) or go up to 1.1.2.
Have fun, or at least try...