1) Download and install the newest version of iTunes.
2) Download Sn0wbreeze-V1.5.2 from http://ih8sn0w.com/
3) Download iPhone1,2_3.1.3_7E18_Restore.ipsw or find it by searching on your computer.
4) Download iREB from http://ih8sn0w.com/
4) Open Sn0wbreeze, load up the firmware and click simple mode. Click yes you want to activate if want to unlock the phone to all networks.
5) A new file will appear on your desktop called sn0wbreeze_iPhone 3G.ipsw.
6) Plug your iPhone in and open iREB. Put your phone into DFU mode - see here if you don't know how http://www.iclarified.com/entry/index.php?enid=1034 once its in DFU mode click on iPhone 3G. The iPhone screen should turn white after around 60 seconds. Be patient.
7) Open iTunes and it will tell you that your iPhone is in restore mode. Hold down shift and navigate to the desktop, select sn0wbreeze_iPhone 3G.ipsw and then let it restore. It took about 10 minutes for mine to restore which is far longer than any update I have ever done but again be patient, it definitely works!
8) Enjoy, Twitter me to let me know if it worked! http://twitter.com/masseyadam