Full instructions that work for a 3G. C&Ped below.
I can vouch for
this method by jw12345678 for use with iPhone 3G only: Though there are some
edits I made that work better (combining step 6 with the last part). This is only known to work with Macs becasue it uses the terminal app.
Oh and yes, you can get tethering back.
1. First download the .ispw file for 3.0 or 3.0.1 (its called iPhone1,2_3.0.1_7A400_Restore.ispw) and stick it on your desktop.
2. Download the irecovery folder that contains a terminal icon thing called iRecovery, and another file called libusb-0.1.4.dylib. Take them both out of the folder and stick them straight onto the desktop.
Link to my post that has it attached
3. Plug iPhone into you computer, launch iTunes (iTunes 9 works) and then put iPhone into DFU mode by holding home(front) and top buttons for ten seconds, then releasing top button but continuing to hold home button for a further ten seconds.
At this point the screen should be black and iTunes will flash up that its detected a phone in recovery mode. It offers to restore your phone.
4. Click on restore button while holding option down. This tells iTunes that you want to choose your own install file. Select the .ispw file you downloaded and stuck on the desktop earlier and click ok.
After a stomach churning pause where nothing happens it will then start to restore, both by telling you on screen and then giving a progress bar on the phone screen.
5. When that is finished iTunes will flash up the error 1015. This is fine, just click OK and quit iTunes.
6. Launch a program called Terminal (you've got it in the Utilities folder) then Cut and Paste the following instructions line by line (one at a time), pressing return after each line. (and entering your password when prompted)
cd /usr
sudo mkdir local
cd /usr/local
sudo mkdir lib
cd /usr/local/lib
sudo cp /users/
YOURNAME/desktop/libusb-0.1.4.dylib .
sudo chmod 755 libusb-0.1.4.dylib
cd /users/
YOURNAME/desktop
./iRecovery -s
setenv auto-boot true
saveenv
fsboot
(remember: replace YOURNAME with the name of your home folder. The end period in "sudo cp /users/YOURNAME/desktop/libusb-0.1.4.dylib ." is important)
Give it a few seconds and your phone will reboot.
Open iTunes back up and set up as new phone. Then sync.