sounds like that is your only option right now....maybe try to do the downgrade after a fresh restore?
here is a quote from the 'sticky' on iphone hacks forum
iPhone 3G
Baseband Modifiable - No
Baseband Downgradable - Yes - Only on certain Bootloader versions.
Baseband Unlock - Yes
Baseband True unlock - No
Jailbreak - Yes
Bootloader Modifiable - No
Notes - iPhone 3G has been successfully unlocked by the Dev Team, using yellowsn0w and UltraSn0w. Both unlocks are exploit dependent (like anySIM days).
It needs to be activated. So two ways to do that. One find an active att sim card and throw that in and connect it to itunes. Or I think your can hack it some how. I am not very experienced with that.