In short, the latest 4.2.1 firmware. Jailbreak is possible only if you have a Mac (meaning untethered), and beta flasher is very unstable.
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My advice — put 4.1, it does not differ from 4.2.1 in addition to air services, which I am more than sure you don't need.
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If you update to 4.2.1 unable to say goodbye to Gail in principle.
Before you update to 4.1 make sure to save SHSH BLOB in Cydia!
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Tethered jailbreak I do not see at all.