1. Get a fairly recent version of iPhuc There are many versions floating around. Make sure yours isn't too old.
2. Locate your 1.1.1 ipod software bundle. On the Mac, this is in ~/Library/iTunes/(iPhone or iPod) Software Updates.
3. Extract the ipsw file Create a new folder and unzip the 1.1.1 .ipsw file. It is actually a renamed zip archive.
4. Locate the WTF file Inside the unzipped ipsw folder go down to Firmware > dfu and find the file that starts with WTF.
5. Connect your iPod or iPhone to the computer and launch iPhuc Make sure that iPhuc connects to your unit and has a normal prompt (one where you can issue the "ls" command and see the contents of your Media folder). If iTunes starts up, quit it.
6. Enter recovery Type enterrecovery, press return and quit iPhuc. Your unit should go into recovery mode.
7. Relaunch iPhuc. You should now see the recovery mode options. Enter filecopytophone followed by the path to the WTF file and press return. Then Enter cmd go and press return. Quit iPhuc.
8. Launch iTunes. It will complain that it has found an iPod or iPhone in recovery mode. Click OK. Then Option-Click (Mac) or Shift-Click (Windows) the Restore button.
9. Choose the 1.1.1 ipsw file Locate the ipsw file (not the unzipped folder) and select it and start your restore. The screen *should* go white. That's normal. If all is well and good, your iPhone or iPod touch will downgrade succesfully.
10. Dealing with error 1015 If you run into error 1015, connect your newly restored unit to INdependence or try issuing a cmd fsboot from iPhuc.
Once downloaded, you'll have to go through all the standard re-activation and jailbreak procedures.