i have a unlocked 3g i just tried to upgrade using the pwnge tool and the custom firmware and itunes keeps telling me error 1600..
can i just do a factor restore or will that screw up my baseband, leaving me unable to unlock
There's no need to triple post to bump the thread up, I can see it...
Anyway, since you're still in DFU, hold down the home button and the power button for about 10 seconds. Next just press the power button and your phone will startup at usual.
Then go into Recovery Mode and restore with Recovery Mode instead of DFU. Try it.
The problem you are having is caused by not letting Pwnage tool put the phone in DFU mode for you. Follow the instructions exactly as pwnage tool says including the count down on the buttons and you will be fine. By putting the phone in DFU manually you are missing a part of the exploit and hence the failure.