IOS – Is iOS 4.1 faster than iOS 4.0 on the iPhone 3G

Having used 4.2 GM on my iPhone 4 for a couple of weeks now I personally find it much much better at managing and minimising memory usage (regular checks using iStat). This should translate to better performance on older devices with limited RAM as less RAM to flash swapping will be required.

From my experience, 3.1.3 is indeed the best version for iPhone 3G, if you don't want any new or updated app. I've installed 4.2 on an iPhone 3G and it does become slower, though not so bad. If you put side to side a 3G with iOS 3 and one with any version of iOS 4, you'll see the 3 outperforming the 4 for most tasks (other than some native multi-tasking maybe). Other than the slightly faster performance, the best iOS for any iDevice is the latest one, like wjlafrance said.

Unless it is jailbroken, I can't tell what could possibly make iOS 3 slow. On iOS 4 it is only multitasking that can harm the performance AFAIK. Same issue with jailbreaking - gets slow if you install too much stuff running on the background. And an old device will suffer aging impact only on the battery. Hopefully a fresh restore would solve the "sluggish" but I'm afraid it might not.

Anyway you can easily* downgrade without jailbreaking. On 3G, you just* need the right file, enter DFU mode and option+click on Restore from iTunes.

* It is that simple, but there is more to it and it can become complicated. If you need more details, try this guide on lifehacker or this another even more detailed one on redmondpie.