yes iPhone1,2_3.0_7A341_Restore.ipsw is the iPhone 3G version. and yes it does restore so you'll lose everything from your phone BUT if you make a backup in iTunes before hand then that backs up everything except media (i.e. contacts, calendar events, notes, safari bookmarks, settings, etc.). all of your media is on iTunes so you don't have to worry about that.
I was able to keep everything in tact. There was an "Update" button in my iTunes so I shift-clicked that, selected the new ipsw and installed. Saved a bunch of time. I do miss my jailbreak dearly though.