Could you explain point number 2 in details? You said "Ensure your hosts file is pointing at Apple" then you said "Ensure you remove all lines which refer to gs.apple.com" what did you mean by that? i'm really confused!!
You can do this easily with TinyUmbrella. Simply open it, switch to the Advanced tab, UNTICK the option "Set Hosts to Cydia on Exit", and then exit TU. DO NOT USE TU FOR ANY OTHER PART OF THE PROCESS!
Hey buddy can u pls tell the link from where u downloaded IPSW 4.3.5?
And can u pls post 'step by step' procedure here.. And did u get any error while doin it?