I know there are quite a few back and forth on what needs to be done.
basically, i had the SHSH stored in Cydia for 3.1.2 and 3.1.3.
I followed the instructions on iClarify to downgrade to 3.1.2
http://www.iclarified.com/entry/index.php?enid=7557.
I got the error message: If you get error message 1015 repeat the entire restore then jailbreak after it fails the second time. So I proceeded to jailbreak with ultrasn0w. It continued to stay in recovery mode so then I used TinyUmbrella to break it out of recovery mode.
After all this, I'm essentially on the baseband 05.13.04 and firmware 3.1.2. I installed Cydia and unlocked it.
I am good to go. Thanks for everyone's help.