yes you must update, if your iphone is factory unlock or carrier unlock, then you can go ahead and update to firmware version 3.1.2, blackrain is a jailbreaking tool for iphone with with firmware 3.1 and above. But if your phone is locked to a carrier, it is best for you not to update to the latest firmware. To be save, you just restore your phone with custom restore ipsw which is iPhone1_2_3.1_7C144_Custom_Restore.ipsw, by doing this custom restore method, your iphone version is update to 3.1, but your modem firmware is remain at 04.26.08. At this time only modem firmware 04.26.08 can be unlocked by using ultrasn0w. All iphone with modem firmware 05.11.07 only can jailbreak and no unlock.