Alright, finally after many hours.
I have upgraded my iPhone to ios version: 4.2.1 while preserving the 04.26.08 modem firmware.
My last question.
During the creating of a custom firmware via Pwnagetool, I think I might have clicked "Activate iPhone"
I am currently using At&t with an at&t sim, but I will be traveling internationally in a few weeks, so I'll have to switch the sims. Does clicking "Activate iPhone" cause issues?
What exactly does "Activate iPhone" mean.
One more quick thing. After the iPhone was restored via the custom firmware
I searched cydia and found ultrasn0w. All i did was install it. Is my iPhone unlocked now?