Today, MuscleNerd of the iPhone Dev Team has confirmed the same. In a deleted tweet spotted by RedmondPie claims that a untethered jailbreak solution for iOS 4.2.1 is indeed in works, and that it will be ready for prime-time use somewhere around Christmas.
scotty6kids78: @MuscleNerd are we any closer to the unteathered #jailbreak for the new #ios4.2 on #iphone4 ?We still don't know how reality is this tweet but it seems real. We'll keep you updated as more comes !
MuscleNerd: @scotty6kids78 it’ll be here by Xmas (not because we’re sitting waiting for Xmas, but because it’s achievable deadline)