With jailbroken and unlocked iphones this normally occurs during an upgrade of firmware through itunes. Itunes version 9 and above while upgrading firmware also corrupt your baseband if the phone is jailbroken thereby rendering wifi unusable.
I had this issue on my iphone 2G and after deep search and information gathering and attempting successfully, I am putting them together in a single tutorial.
There is no choice but to downgrade to firmware 1.1.4 to fix baseband.
Following is the solution.
1. Windows system (no problem with XP but if you have vista or 7 then run iliberty and redsn0w in compatability mode)
2. Only use iTunes 7.6. Download it from Old Version of iTunes 7.6.0 Download - OldApps.com
3. iPhone firmware 1.1.4 Download it from IPhone Firmware Download Links - ModMyi - Wiki
4. iLibertySetup.v1.3.0.113. Download it from iLibertySetup_1.3.0.113.exe
5. KiPhone (ZiPhone patched by kIREmK(04.05.02_G)
Download from Download ZiPhone patched by kIREmK(04.05.02_G).zip, upload your files and earn money.
Now save all these files in a single folder on the desktop and name the folder as wififix.
Step 1
1.1 If you have anything above or below intunes version 7.6, first uninstall it.
Itunes uninstall procedure.
First uninstall applemobile driver.
Next uninstall itunes
Next uninstall apple software update
Next uninstall bonjour
Next uninstall quicktime
Now go to My documents/My music folder and delete itunes folder.
Next delete Apple Computer folder. In Win7 you will find it under your main OS drive(usually C), Users/the default user/appdata/roaming.
In XP it is under Documents and Settings/Application Data
1.2 Install iTunes 7.6 and reboot.
KILL THE PROCESS ITUNESHELPER.EXE BY OPENING TASK MANAGER (CTRL+ALT+DEL)
If needed back-up the contents of your phone.
IT IS BETTER IF YOU ARE CONNECTED TO THE INTERNET BUT IGNORE ALL ITUNES UPDATE MESSAGES. INFACT WITHIN ITUNES UNDER PREFERENCES DISABLE ALL ITUNES AUTO UPDATE FEATURES.
Step 2
2.1 Switch off iphone and connect it to your PC and launch iTunes.
2.3 Put the iphone in DFU mode.
To put in DFU mode,
Press sleep\wake and home button together. Count to 10 seconds and release sleep\wake button without releasing the home button. Keep the home button pressed till you computer detects the device and appears within itunes.
A soon as itunes detects your iphone it will give a message "iTunes has detected an iPhone in recovery mode, You must restore this iPhone before it can be used with iTunes".
2.4 Now press 'shift' and click on restore button, itunes will ask you to select the firmware(ipsw) file. Point itunes to the wififix folder on your desktop and select the 1.1.4 firmware ipsw file (iPhone1,1_1.1.4_4A102_Restore.ipsw) you downloaded earliar.
Itunes will now restore your firmware. If you get any error message at the end, do not panic, follow the restore steps again and try. If you still get any error message, then you need to use Kiphone to fix the error.
Quit iTunes and start KiPhone downloaded above, select the options debug and ierase and click start.
If it does not detect the iphone, disconnect the iphone and reconnect while pressing the home key
After kphone patches your iphone, repeat the steps from 2.1 to 2.4 and this time your iphone will be restores to firmware 1.1.4 without any problems.
Step 3
3.1 We will use iLiberty to Jailbreak, Unlock and Activate the iPhone,
Install and launch iLiberty.
THE NEXT STEP IS VERY IMPORTANT FOR ILIBERTY TO WORK AND YOU SHOULD BE CONNECTED TO THE INTERNET FROM NOW ON.
Go to Tools menu and under options tab,
replace the url to
http://iliberty.insideiphone.com/repo.plist
and tick the check at startup option.
Now close iliberty and start it again.
iliberty will update itself. Select all the options under Standard tab and click on 'Got for it'.
iLiberty will ask you to do Disconnect and Reconnect the iPhone.
If it does not detect, disconnect the iphone and reconnect while pressing the home key
iLiberty will do the Jailbreak, Unlock and Activation process and at the end of the process you will have a FakeBlanked 1.1.4 iPhone. This can sometimes be a long and drawn out process, please wait patiently and at no time, close iliberty or disconnect the phone.
If you check the settings, you will still find that the wifi is is either greyed out or not switchin on. Now we fix this problem as detailed below
Open iLiberty if it is not already open.
If your iphone wifi is greyed out with no bluetooth, Then
1. Go to 'Advanced' Tab in iliberty and then to 'Payload available on repo' tab and from there select download for Bootneuter, BSD Subsystem and download them. iliberty will download them from its server.
2. After download, select Payload Bootneuter, BSD Subsystem and click Go For It. iliberty will download them to your iphone as application.
3. After this update select Bootneuter icon in your iphone and retain what is already selected and also switch on Fakeblank and run Bootneuter. It will take sometime for Bootneuter to fakeblank. Please wait patiently, it will get over even if it takes about 5 minutes. After the process is over,
4. Come back to iLiberty and this time download DevTeam's FixWifi payload and download it.
After it is downloaded, select payload Devteams Gray WIFI Fix and click on Go For it.
iliberty will now fix the wifi problem in your iphone and reboot it.
Thats it your wifi and bluetooth should be fixed now
If your phones wifi is not switching on with no Bluetooth Signal, Then in iliberty,
1. Go to Advanced Tab and then Payload available on repo and download the payload for Fix for No wifi, No Signal, No Bluetooth.
2. After Download select the Payloads downloaded and click Go For It.
Thats it your wifi and bluetooth should be fixed now
NOW UPGRADE YOUR FULLY RESTORED, JAILBROKEN AND UNLOCKED IPHONE 1.1.4 TO WHATEVER FIRMWARE YOU WANT TO UPGARDE TO.
Remember whenever you are upgrading your firmware, use the right version of itumes. For upgrade to firmware 3.0 with redsn0w use itunes 8.2.
Wheneever you need to change itunes version on your PC, perform a clean uninstall using the method mentioned earlier.
Cheers and good luck.