The only reason I ve decided to post a comment is wish to help or just try to those who experienced problems with iPhone as I did and don't have any solutions yet. Just to be clear my success is a result of visiting so much websites and forums regarding this problem and this is one of them.

OK, this was my state before, when everything was still ok with my iPhone:

Technical details: Apple iPhone 3G with 8GB of memory
OS version was 2.2.1
Modem firmware 4.28.06
Bootloader version 6.02

After a short period of using this combination I accidentaly upgraded my OS version 2.2.1 to 3.1.3 from iTunes and then my nightmares begin.

I don't want to fool anybody around so all be very clear about what I have done next:

First step: Download of 3.1.3 and 3.1.2 OS version from official Apple website and storing it on my computer!

Second step: Download of iTunes latest version also from Apple website and installing it!

Third step: Download of redsn0w 0.92 software version and installing it on my computer!

Fourth step: Connecting my iPhone to PC using USB cable and putting it OFF which is the right way. Interent connection is required all the time while connected to iTunes so it can check your software version.

Fifth step: Installing of 3.1.3 OS version using iTunes trough DFU mode. (DFU mode is expleined when you first start redsn0w or any other jailbraking software and that is hold down the POWER button for 4 sec and then without realesing it hold down the HOME button for another 10 sec and after that, realese the POWER button while holding HOME button for another 10 sec and you are entering DFU mode now. After that in iTunes when message appears hold down the SHIFT key and select your 3.1.3 OS version stored on computer. You can also use RESTORE mode trough iTunes which can be entered by long holding down the POWER and HOME button for about 10 sec until you receive message from iTunes that you are in RESTORE mode. Don't forget to hold down the SHIFT key while clicking on restore button in iTunes where you select already stored 3.1.3 OS version on your computer). I ve used both ways just to make sure its working and the did. After this step which will take up to 10 minutes you should be able to see keypad and possibility of just making emergency calls and globe behind it! Don't worry, all you have to do is to turn off your iPhone again and move to next step.

Sixth step: Lounching redsn0w 0.92 version and using Browse button point to the location of 3.1.2 OS version on your computer. After its proceeded check options Install Cydia and nothing more and then hit Next. On this stage you need to enter in DFU mode which is explained above so when you are ready to do so hit Next again. Also if you don't enter in DFU mode correctly for the first time click the Back button and try again. You will know that you have done good when automated process suddenly starts to transfers files from PC to your iPhone. When this happens just wait for program to finish and then click Done.
Just wait for the installation to be finished and for about 10 minutes you will have a new screen on your iPhone but now fully accessible and operable.

Seventh step: Launching Cydia for the first time and then let it finish all required tasks. Be sure to have Wi-Fi network connection because you are still not allowed to use SIM card potentials such as GPRS, EDGE or 3G and that it because your iPhone is still not fully unlocked. If you don't have Wi-Fi near try to use your fixed connection on your PC to access Internet. This can be done by tethering iPhone with PC. Tethering is closely explained on many websites just try to google that. That is to create wireless network in area using your wireless adapter on PC. Make a standard connection trough ADSL, DSL or a cable modem to Internet and don't forget to share it with your Wireless Network under Properties, and further in Advanced menu. After that turn on your Wi-Fi on your iPhone and connect to Wireless network which you had created earlier. This will provide you full Internet connection.

Seventh step: Open Cydia again and under SOURCES add this link http://repo666.ultrasn0w.com and leave the process to be finished. Only if the installation was OK then after short time you will see Reboot option. If some errors occurs repeat the whole process again. If everything is OK and your iPhone is back again after rebooting then you are ready to put your SIM card in its locker and finally to use your iPhone again. This whole process went good for me and now I have healthy iPhone.

So if this source doesen't help you try http://blackra1n.com again under Sources in Cydia. Repeat the whole process like in the step before.

That would be all that I have done to make my iPhone working again. There are many others way I m sure and many others apps to do same or maybe better but this combination worked fully for me and JUST for my version of iPhone considering all technical details I have stated in the begining of my note.
Lots of luck iPhone users.

IMPORTANT: (New status of my iPhone after this whole process):

Software version: 3.1.3 (7E18)
Modem Firmware: 05.12.01
Bootlader Version: 6.02

Damn did Apple just get smarter this time or what!!!! Damn wankers :(