This tutorial will use WinPwn to unlock and jailbreak your 2G iPhone on the 2.0 firmware.

Some 2G users have experienced problems with the latest version of WinPwn. Make sure to set the partition size to 512MB or higher!

To follow this tutorial you will need to have iTunes 7.7 installed (make sure to reboot). Also, you may need to download and install .Net Framework if you are on Windows XP.

Step One
Create a folder on your desktop called Pwnage. In it place the following files: [You must be registered and logged in to see this link.] , [You must be registered and logged in to see this link.] , and the latest [You must be registered and logged in to see this link.].



Step Two
Install WinPwn by extracting the downloaded zip from Step One and running the setup executable. Once WinPwn has been installed it will put a shortcut icon on your desktop. Double click to launch the application.



Step Three
Once WinPwn has opened click the Browse .ipsw button.



Step Four
Locate the 2.0 firmware file (iPhone1,1_2.0.1_5B108_Restore.ipsw) from the Pwnage folder on your desktop and click Open.



Step Five
WinPwn will check the firmware to make sure its valid. Now click the IPSW Builder button.



Step Six
The IPSW Builder window will open to the Applications tab. Check to select Cydia and if you are not on AT&T then check to select YouTube Fix.



Step Seven
Click to select the Custom Images tab. From here you can select
your own boot images.



Remember the rules for them: RGB or Grayscale format with Alpha channel and dimension bellow 320x480. If you would like to use the the ones I made, they can be found here: [You must be registered and logged in to see this link.], [You must be registered and logged in to see this link.]



Step Eight
Click to select the Custom Payload tab. From this tab you can select custom payloads you have created to be automatically installed. We will discuss this in a future tutorial.



Step Nine
Click to select the Advanced tab. Check to select: Activate Phone, Enable Baseband update, and Unlock baseband.



We will also need to load the Bootloader files. Click the Bootloader 3.9 button and then select the BL39.bin file in your Pwnage Folder. Then click the Bootloader 4.6 button and select the BL46.bin file in your Pwnage Folder.



*****FOR THE PARTITION SIZER, SET IT TO 512MB!!! IF YOU DO NOT SET IT TO SOMETHING ABOUT 500MBS, IT WILL NOT WORK*****



Step Ten
Click the Build .ipsw button at the bottom left to build your custom ipsw firmware file. Navigate to your Pwnage folder and click the Save button.



Step Eleven
Once WinPwn has finished creating your custom firmware then click the iPwner button from the main menu.


Step Twelve
Select the custom firmware file we just built from the Pwnage folder on your desktop and click the Open button.



Step Thirteen
You will then be notified that your iTunes has been Pwned!



Step Fourteen
Next we will need to put the iPhone in the DFU mode and restore using iTunes. To put your iPhone into DFU mode please follow [You must be registered and logged in to see this link.] instructions!

Step Fifteen
iTunes will prompt you that you are in recovery mode.


Hold down Shift and click the Restore button in iTunes.


A popup window will appear asking you to select your firmware. Select the Custom firmware file we saved in the Pwnage folder and then click the Open button.


Once the restore is complete you will have your iPhone unlocked and jailbroken

This is the only helpful post I've found so far and the screenshots make it easier to follow.
Thanks guyz... Appreciate the effort... Im on the bootlog thing and seems to be working pretty nice for me....

Will this work on an iPhone 2g running 3.1.2 firmware (7D11) and was not unlock or jailbroken before?

This a Windows only process and yes it does work for iPhone. Still I suggest you use blackra1n which is far more easy and safe. [You must be registered and logged in to see this link.] to see the step by step guide to jailbreaking 3.1.2 using blackra1n.
Hope this helps. Rep up if you found this useful