Upgrading in iTunes on a jailbroken device has become rather complicated in order to avoid problems. I have made a step-by-step guide to help in this process to help you understand the proper way to upgrade. For the purpose of this guide, I will use as an example upgrading from 2.0.2 to 2.1. However, the concepts apply to any upgrade.

First off, if you have never jailbroken, you don’t need to worry about this guide. Just hook your iPhone up to your computer and tap the “upgrade” button and wait. That’s it! Now proceed to the jailbreak guide of your choice.

The complications come when you have a jailbroken device and you want to upgrade. Say you are running 2.0.2 and have a lot of Cydia apps installed. You want to upgrade but you don’t want to lose these apps. You may have a lot of customizations, icons hidden, and other things. If you upgrade, you will find your hidden icons are still hidden but the apps required to unhide them are not yet installed. Here are some steps to help:

First off, you never use “upgrade” on a jailbroken device. If you do that, you automatically lose about 500mb of disk space and never recover it until you finally restore. If you upgrade from 2.0 to 2.0.1 using upgrade button, you lose 500mb. If you then upgrade from 2.0.1 to 2.0.2, you lose *another* 500mb. And this continues until you hit the restore button. The data loss is because Cydia moves your files around to free up space. The moved files become inaccessible but stay on your disk which means you essentially just lose the space. The more apps you had installed in Cydia, the more space you lose.

The solution to this is easy. Restore, do not upgrade. Here are the steps that you should take on a 2.0 device to upgrade without any loss or issues:

Step 0) Before starting, upgrade your iTunes first. If you are moving to 2.1, you need iTunes 8. Upgrade that now. You can get all iTunes versions for Windows here.

Step 1) Install aptbackup from cydia and run it to backup your apps. This will make a list of all your cydia installed apps and put the list in a location that can be backed up by iTunes in step 2.

Step 2) Sync with iTunes. Do the full backup. It may take you a while on 2.0 – 2.0.2 but you need this step. Go get dinner or coffee or watch a movie. Come back when it’s done. If you disabled backup in iTunes then you can still backup by right clicking on the device under “Devices” on the left and selecting “backup”. Do not get impatient and interrupt the backup. If you do, it will be corrupted and useless. You would lose everything on your restore.

Step 3) Restore your firmware. If you are upgrading to the latest version of firmware you can just let it download and restore. To do this, click “restore” and wait. If you would rather download the firmware manually, you can get all firmwares here.

Step 4) At this point, if you are a contract subscriber (AT&T or such) you need to activate your device in iTunes. Just hook it up and wait, it should auto activate allowing you to slide to unlock to icons. If you are unlocking, you probably see “slide for emergency” only. Do not do anything else in iTunes at this point. Disconnect your device from your computer. Do not restore your backup, do not set up as a new phone, just remove the device.

Step 5) Do not restore your backup in iTunes yet. Instead, jailbreak your device now. I suggest using quickpwn. You can follow my guide here.

Step 6) Using Cydia, install aptbackup. This is the most important part, do not skip any of it. The rest of this step will allow you to correct any problems you encounter in the next steps.
a) Install open SSH.
b) If you had 5 icon dock installed before the upgrade, install that now also.
c) Install BossPrefs

Step 7) Restore your backup from iTunes. Just hook back up to the computer and when asked, restore as a backup from whichever iPhone you had.

Step 8) iTunes will restore your settings, contacts, notes, pictures, and all your apps. Now to restore the rest of your Cydia installs. Open aptbackup and hit restore. It should reinstall all your packages from Cydia. If aptbackup is now hidden (missing icon) after your iTunes restore, load BossPrefs, go to hidden icons, and unhide it. You can also unhide any other hidden icons here.

Step 9) If you had a bunch of category folders and moved most things into it, the iTunes backup will have made these icons disappear. You  can unhide them via BossPrefs.

For any help not listed here refer to my other post describing the issue in greater detail.