I had the exact same problem. I actually used the categories app, but the icons are hidden in the same way, I believe. Anyway, I hid BossPref and the Categories app, so there was no way for me to unhide the icons. In the end I ended up with a successful 2.1 upgrade, but many hidden icons. I tried various restores, but I was still unsuccessful.
If you're in the same boat as I am, I mainly did not want to lose my contacts, sms, email, calendar, notes, Safari bookmarks, etc. I found an easy way to get these back though. I'm assuming you have a jailbroken 2.1 phone now with hidden icons. If so, then you can try the following.
1. Download the
DiskAid app.
2. Connect your iPhone and start up DiskAid.
3. On the bottom left where you see "Media Folder" select "Root" and click OK at the message.
4. Navigate to /var/mobile/Library/
5. I simply copied the entire "Library" folder to my computer just to have everything backed up.
6. At this point I did a full restore. (Unfortunately, this was the only way to get all my icons back.)
7. I re-ran the upgrades steps noted on
quickpwn.com
8. Once you have a working jailbroken phone, use DiskAid again to copy back some backup. (Example, I copied the sms.db, AddressBook.sqlitedb, and other items i wanted to restore from the PC backups I made back onto the device.)
You might need to restart some apps to actually see the items restored. Yes, I did have to sync my music, photos and videos, but that wasn't a big deal for me. It was the manual data I had entered before I didn't want to deal with. Also, if you copy back in your email folder (/var/mobile/Library/Mail) then you'll have your email cache back, but you still have to set your passwords back in the settings area to make sure you can check emails.
I sure hope that helps.