iPhone 3GS Stuck In Safe Mode, Restore?

iPhone 3GS (white) 16GB
Software version: 3.1.2 (7D11)
Modem FW: 05.11.07
Serial #: 88950W.....
Jailbroken (Tethered), unlocked with UltraSn0w

My iPhone is stuck in "Safe Mode", I've tried to exit safe mode by restarting but it doesn't work, it just restarts & springboard crashes again. I got some help on an IRC channel yesterday, I installed syslogd, they reviewed the log and suggested I uninstall and re-install winterboard, I did that and it didn't fix the problem. The exact error I get is:

"We apologize for the inconvinience, but SpringBoard has just crashed.
MobileSubstrate /did not/ cause this problem: it has protected you from it.
Your device is now running in Safe mode. All extensions that support this safety system are disabled.
Reboot (or restart SpringBoard) to return to the normal mode. To return to this dialog touch the status bar."

I'm now considering a FW restore, my question is, what options do I have? I want to maintain my unlock and (tethered) jailbreak, what firmware will you suggest I update to? I used the "Backup to .ipa package" feature of i-FunBox to backup my apps and I'll like to restore them after installing a (newer) firmware.
Any help is appreciated.

 

Errr.. BUMP ..