iPhone 4 iOS 4.2.1 custom firmware AT&T
(jailbreak) | 632.66 MB
iPhone 4 iOS 4.2.1 custom firmware (preserves your baseband good for unlockers)

Note: Do it at your own risk.

Does NOT activate your iPhone (needs original AT&T SIM to activate it)

Packages included:
Cydia (of course)
SBSettings
Backgrounder
Springflash

Requirements:
iPhone 4
Note: After Apple releases iOS4.3 and stops signing iOS 4.2.1 a SHSH signature for iOS4.2.1 will be required (you will need tinyumbrella TSS server running with that SHSH for your device).

Unlock requirement
Baseband 01.59.00 (as of today Feb 15th, 2011)

Suggestions:
Multifl0w
Cyntact
3G unrestrictor

How to install:
Always sync and backup your iPhone before attempting this.
Put your iPhone 4 in DFU mode (press and hold home and sleep button simultaneously for 10 seconds then release ONLY the sleep button and keep holding the home button for another 10 seconds. You should have your iPhone screen all black and your iPhone is probably at DFU mode right now.
Open iTunes (it should alert that your iPhone is at recovery mode just click OK)
Press and hold the Option key (Shift key for Windows) and click Restore, then browse and select the custom firmware .IPSW).

Happy Jailbreaking ....!
Good Luck and Have Fun ....!

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How can I make sure iTunes is using SHSHs Sauriks / cydia server to sign the firmware with on file SHSHs ?

All we need, then, is to make iTunes use it. Luckily, most operating systems also have the ability to locally define bypasses on specific hostnames through a file called hosts. Using this, we can redirect requests to Apples signature server to Cydia.

So, open the file C:\Windows\System32\drivers\etc\hosts (Windows) or /etc/hosts (Mac OS X) and add the following entry to the bottom of the file.

74.208.10.249 gs.apple.com

How do I do that? Open Terminal (applications\utilities\terminal), type sudo pico /etc/hosts, enter your admin password, move your cursor to the end of the file and past the entry >> 74.208.10.249 gs.apple.com, type ctrl x to exit and save it (Y).

Now, when iTunes thinks it is talking to Apple, it is talking to Cydia instead. Doing this will allow iTunes to access signatures already stored by Cydias on file feature.
This server will also act as a cache for any SHSH blobs it hasnt seen, acting as an intermediary to Apples server. This effectively registers your device with the on file mechanism, which means you can now enjoy the protections of being able to downgrade your firmware in the future even if you arent jailbroken.
This point should be stressed: even if you dont jailbreak, and even if you never intend to jailbreak, you should consider using the new on file service.
Lets say that Apple releases an OS upgrade in the future, you take it, and they break something important. Maybe they break your e mail , or your todo list. Your business is now crippled.
If only you could downgrade, right? Alas, Apple wont let you anymore. Thats where the new signature cache server comes in: by doing your restores through this server you secure your ability to not accept upgrades from Apple if the need is dire.

UPDATE: you can always use your own SHSH if you have it saved on your computer but you will need to start tinyumbrella TSS Server before opening itunes.