Am I correct to download the firmware file: iOS 4.0.1 for iPhone 3GS from this post?
Absolutely

Should I modified my Windows HOST file and add 74.208.10.249 gs.apple.com in it to do this upgrade?
Yes, you should modify the hosts file.

Should I enter DFU mode before I proceed with the [Shift]+Click? (I read I should do this if I want to downgrade, but how about upgrade?)
You must, put into DFU mode before restore.

You can only upgrade to 4.01 if you had saved shsh via cydia before only. What you can do now is just upgrade directly to 4.0.2.
Put your phone into DFU mode and click restore.

This frightened me, make me hesitate whether to do the upgrade... 
I heard there are "Recovery Mode" and "DFU" mode and they are different, are you sure you in the correct mode?

Yes, you are right. You sure you have the firmware saved?

Let me share what I did on this...

The "condition" for my case are...
I was in 3.1.3 and jailbroken with Spirit before.
I choose the Make my life easier in Cydia at that time, to backup the SHSH on file.
Cydia stated my device had SHSHs on file for iPhone OS / iOS: 3.1.3 4.0 4.0.1

Then I start to download the 4.0.1 firmware file from this post: http://forum.lowyat.net/topic/1223378
I then edited my HOST file which is located at C:\WINDOWS\System32\Drivers\etc in my Windows system and add a line (74.208.10.249 gs.apple.com) in it using Notepad and reboot my PC
Connect the phone to iTunes, put the phone into DFU mode while keeping iTunes open
When iTunes say I should check online for latest software, I did so then another iTunes message pops up saying I must Restore my phone before iTunes could recognize my phone or something like that (sorry, can't remember exactly)
Then it is time for me to [Shift] + Click on the Restore button in iTunes and browse to the ipsw file I've downloaded above
At last, follow everything on the screen to complete the "restore" process.

When the phone with new firmware re-appear on iTunes, I choose "Setup as new" instead of "Restore from backup" to avoid restoring any possible corrupted files or settings.

I really wish you could succeed with the firmware restoration too...! 

You are absolutely welcome, me too need help from other veteran here and they really helpful... 
Haha... I don't know if reboot is really required? Or, this really could cause failure to restore? I just do it since it will not cause any harm. 

Yes, the phone is powered on, and while iTunes still open, press <Power> + <Home> long enough for the phone to totally power down, (again, people said shut down this way is different than the ordinary "Slide to power off" method) and begin the DFU mode buttons combination.

Another thing I'm not sure if it is useful to you: Make sure your iTunes is 9.2 (mine is 9.2.1.5)

Good luck~ Good luck~ wish you all would success too~!