Here are instructions to downgrade :

Step 1: Download iPhone 3.1.3 / iPhone 3.1.2 Original Firmwares from Here.
Step 2: Put your Device in DFU Mode.
Step 3: This step is for iPhone 3GS, iPod touch 3G and iPod touch 2G (MC model) Owners who saved SHSH on Cydia for the Firmware you downgraded to, If you are on iPhone 3G or iPod Touch 2G then Skip this step.

  • Locate “C:\Windows\System32\drivers\etc\” for Windows and “/etc/” directory for Mac, then locate “hosts” file andOpen it in Notepad (for Windows) or TextEdit (for Mac OS X) and add this at the bottom of the file.

74.208.105.171 gs.apple.com

At last it will be like that, then save it.

Step 4: Now, You will have to restore your iPhone or iPod Touch to the firmware you have downloaded by Clicking on iPhone icon that appears in the left sidebar of iTunes then hold left “alt” button (“Shift” button on Windows) on the keyboard and then click on “Restore” then release the alt button, Now Select the firmware you have downloade din Step 1 and Let iTunes do some automated Steps. (Note: If you got some error, Just ignore it)
Step 5: You will need to Exit Recovery Mode, So Download RecBoot (WindowsMac) and Click on “Exit Recovery Mode” and your Device will restart automatically.

Have a look at these :
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