Can you guys post what you did that made it work?  I have a 2g iphone, 2g firmware (iPhone1,1_*), and I'm still getting that error.  I've tried 3 different ipsw's, 1.1.4, 2.1, and 2.0.2, and Pwnage doesn't seem to recognize any of them.  The phone is not activated, and has a t-mobile sim, so iTunes (8) doesn't interact with it (or rather it tells me my sim is incompatible).  Any ideas?  Do I need some special firmware?  Can Pwnage not help me?  Ziphone worked for me before (I've since restored, but to what I'm not sure), if I use that again can Pwnage then get me up to 2.0+ and Cydia?  thanks!