If you used anything but Anysim 1.1.1 or IphoneSimFree (that includes iunlock, anysim 1.02, etc) to unlock your 1.02 phone, you MUST virginize your phone before upgrading to 1.1.1 to save a lot of headaches (Fixing a bricked 1.1.1).
Please read Bigboss\Xmod's guide on how to Virginize. This method is easier than others since Bigboss has compiled it all into a script and the script can be executed right from the iPhone!
Note: if you updated to the latest Installer, look under the FAQ to see how to add the new repository. You MUST add this repository otherwise you will not see the virginize scripts or Anysim 1.1.
After running the virginize scripts, you can safely update to 1.1.1 with the latest version of itunes and then Jailbreak.