1.Why did this work, or in other words if we had not used “Spirit” in the past why would this method not work?
was something saved on my computer in iTunes or with Cydia?
Since you had used Spirit JB and had cydia on your device chances of you having saved SHSH blobs were higher so Cydia server had saved your SHSH blobs which helped you achieve this.
You can manually save SHSH blobs as well you just have to use Umbrella details of that are here viewtopic.php?f=329&t=137790
Make it a habit to keep doing so with every firmware update
2.Should I use Cydia's “make my life easier,thanks!” now? If one does then what happens if you do an accidental upgrade in the future that removes jailbreak. How do you downgrade again if cydia has your SHSH blobs?
YES you should use Cydia's “make my life easier,thanks!” additionally also use umbrella just to be safe.
If you accidently upgrade do this :
Updating the Firmware
1. Open iTunes (make sure it's v8.2) and connect your iPhone/iPod Touch.
2. Select iPhone/iPod Touch under 'Devices' on the left.
3. If you're using Windows: Hold down the 'shift' key, and click on the restore button. If you're using a Mac: Hold down the 'option' key, and click on the restore button.
4. iTunes will pop up with a window which will let you browse for the .ipsw firmware file you want to install.
5. Wait while the firmware is being installed. (located in next post)
3.Now that I have modified my hosts as you suggested and done the “downgrade” to 4.0.0- should I remove (delete) the 74.207.10.249 gs.apple.com from the C:\Windows\System32\drivers\etc hosts file? Does it do anything to my PC by leaving it there?
Let it stay or you can remove it its your choice but if you remove it whenever next you want to update you would need to do it again. Editing of host files is done so that you change the communication server, and then we will ensure that iTunes checks the firmware on the server rather than opens Saurik to Apple! Because your ECID is on that server, the verification will fail and restore the previous version will be done without too many problems!
4.Should I bother with downloading the PDF Patch from Cydia to fix the exploit?
Yes you should for the patch is the only thing that protects user of iphone and itouch against malicious codes which migh be present in various websites.
After you have that on to test go to jailbreak me and slide to JB if you just see the background with stars and nothing else you are protected.
?5.Do you have any advice for transfering music and apps (games) from iTunes to the iPod.
I have installed “AppSync” from cydia but the apps and music still do not appear on the iPod after syncing (have tried download an app from the apple store and then syncing-still no luck)
Make sure you have AppSync 4 and the first time you use it its advised to download a free app from apple before trying to get stuff from her.