iH8snow, the developer behind Sn0wbreeze, iREB, and f0recast has just announced that he is working on a new version of Sn0wbreeze that will offer baseband preservation mode.
This feature was first implemented in TinyUmbrella which allows preserving iPhone 4 only baseband while upgrading to iOS 4.1 but this tool stopped couldn't preserve the baseband while upgrading to iOS 4.2.1.
Now with the new version of Sn0wbreeze by iH8sn0w, you may be able to preserve iPhone 4 / 3G / 3G while upgrading to iOS 4.2.1. Below is the first screenshot of the new version:
There's no ETAs yet, but iH8sn0w plans to roll out Sn0wbreeze 2.2 very soon. We'll of course post updates as they come!
On the other hand, Redsn0w 0.9.7b2 was released few hours ago to fix all native app crashes and bring untethered jailbreak for iOS 4.2.1.