I think you are a bit confused as to what this actually does.
Starting the TSS server actually runs a little web server on your computer that runs until you stop it. This means it is an ON/OFF switch, not a run-until-it-is-done. This also means to use it, TinyUmbrella must be running and the TSS server must be running through the whole restore process.
Once the TSS server is running, you must restore using iTunes. The TSS server just simplifies a few of the steps required to restore a none-signed firmware.
You are mixing and meshing (badly) a whole bunch of unrelated instructions. Apple is still signing 4.1, so you only need TinyUmbrella to restore on an IP4 to preserve the baseband. PwnageTool effectively does this for you, so you wouldn't need TinyUmbrella.
Basically, I think what you are trying to accomplish is this:
Startup TinyUmbrella
Run TSS Server
Upgrade in iTunes to 4.1
After it goes through the restore progress bar once and asks you to restore again, click "Kick out of recovery" or whatever
Rejailbreak via greenpoison or limerain
Profit.
This will upgrade an IP4 without upgrading the baseband.
The alternative (and probably safer way to accomplish this) is to just download PwnageTool and skip the TinyUmbrella step all together.
As a point of curiosity, does using PwnageTool hacktivate? I used the TU/greenpoison method to upgrade to 4.1...