The process involves patching of the existing version of PwnageTool with these new bundles, and then using it to build a custom firmware file for the mentioned iOS devices. To make Cydia working, you will have to use the included patched Cydia binary and use bspatch command to apply this patch, more on this in the detailed step by step guide posted below.
Step 1: Download PwnageTool 4.1.2
Step 2: Download the latest version of PwnageTool Bundle for iPad and iPod touch 4 on iOS 4.2.1
Step 3: Now download iOS 4.2.1 GM for iPad or iPod touch 4G. You can get the official bits if you are a registered developer, or from different content sharing sites around the web. Please do not ask for the download links as they are illegal to share; a simple Google will do it all !
Step 4: Copy PwnageTool that you downloaded in Step 1 to a folder on your desktop. Right click, and then click on “Show Package Contents”
Step 5: Navigate to Contents/Resources/FirmwareBundles/ and paste iPad1,1_4.2.1_8C148.bundle file in this location and then simply close this folder.
Step 6: Once you are done, close all the open windows and start this patched version of PwnageTool, Select “iPad, Apple TV 2G” option and click next.
Step 7: PwnageTool will now identify iOS 4.2.1 GM firmware file as shown in the screenshot below.
Step 8: PwnageTool will now create the custom .ipsw file for your iOS device which will be jailbroken.
Step 9: Now follow the following steps to enter DFU mode:
Hold Power and Home buttons for 10 seconds
Now release the Power button but continue holding the Home button for 10 more seconds
You device should now be in DFU mode
Step 10: You will now have to restore your iPad or iPod touch 4 to this custom firmware 4.2.1 file. Start iTunes, click on your device icon from the sidebar in iTunes. Now press and hold left “alt” button (“Shift” button on Windows) on the keyboard and then click on “Restore” (Not “Update” or “Check for Update”) button in the iTunes and then release the “Shift” button.
This will make iTunes prompt you to select the location for your custom firmware 4.2.1 file. Select the required custom .ipsw file and click on “Open”.
Step 11: Now sit back and enjoy as iTunes does the rest for you. This will involve a series of automated steps. Be patient at this stage and don’t do anything silly. Just wait while iTunes installs the new firmware 4.2.1 on your iPad or iPod touch 4. Your iOS device screen at this point will be showing a progress bar indicating installation progress. After the installation is done, your device will restart automatically and you should now have a fully jailbroken iPad or iPod touch 4 on iOS 4.2.1.