You can upgrade with a custom firmware made with PwnageTool. You must be sure not to upgrade to the official 4.0 firmware, only to a pre-jailbroken custom one.
Ok. Unlocking and Jailbreaking the first time (nearly a year ago) seemed much easier. To be frank, I don't even know what you mean by "ipsw" but I'll take your word for it. I'm not very bright so anyone who could handhold me with some step-by-steps for my current configuration would be much appreciated. 🙂
Ok then I think I used Redsn0w or the jailbreak tool at the time from the iphone dev team. I'm 90% sure I didn't use Spirit. Again i hacked it nearly a year ago.