iphonejailbreak
How does it actually work? Does it change just the firmware on the main filesystem? Does it touch the bootloader?
I'm trying to figure out what's probability of
Edit: should probably mention it's a 3GS with 4.1 firmware.
This is, unfortunately, expected behavior. Whenever you activate an iPhone (which you do as part of an OS install) it talks to Apple's servers and does various things like exchange crypto certs for APNS, etc. It also checks the IMEI of the phone to see what carrier Apple sold it to, and validates the SIM is valid for that carrier (if you buy an unlocked iPhone in a country where you can buy either locked or unlocked phones the vendor will actually copy down the IMEI number of a normal locked phone, and then enter in their system where it gets pushed to Apple's servers as an unlocked phone, there is no physical or configuration difference on the phones).
The easiest way to get it activated is (as you surmised) to use an AT&T SIM. You mentioned you have an iPhone 4, you can activate it with that SIM. There are plenty of companies that sell microSIM to SIM adapters, but if you want to do it right now you can just place the micro SIM directly in the iPhones 3GS's SIM try with tape. I would not recommend doing this on a device you intend to keep the SIM in for a an extended period because the SIM is likely to come loose (and jam the SIM tray), but if you are just inserting it, activating it, and removing it you should be fine so long as you are pretty careful with how you apply the tape and not shaking the phone too much.
Did you move from 4.0 to 4.1, or from 4.0.1/2 to 4.1? Between 4.0 and 4.0.1 Apple changed the calibration of the bar display, such that at a given signal strength it shows a fewer bars. They did that in response to the iPhone 4 antenna publicity, but the changes were done for all devices that support 4.x.
So, if you went straight from 4.0 to 4.1 getting fewer bars is expected, though if you are dropping calls where you previously didn't that is a real issue, or if you updated from 4.0.2.
Best Answer
Jailbreaking utilizes an exploit in the OS (or in the latest cast, the boot ROM), and injects the payload onto the phone, which is usually a loader to install Cydia, or Cydia itself. Cydia is the source for applications not in the App Store, and once this is loaded, other software can be installed which could modify system files. One such case is Winterboard, which allows you to customize aspects of the UI.
With regards to question 1:
It depends on what happens during the jailbreak. If, for example, you're running the exploit to jailbreak the phone and the battery dies (or the software malfunctions), there's a chance you'll brick it. It's hard to pin a percentage on it.
With regards to question 2:
Since Apple is expecting their software to be running on the phone, it may do some things that could brick the phone. Again, it definitely varies on what has been changed, how the jailbreak was performed, etc. Personally if Apple comes out with an iOS update, I'm not going to just allow it to run. If I want it, first thing I'd do is restore the original firmware via iTunes.