Kavin

Update: iPhone 3.1.2(7D11) is out.

iPhone OS version 2.0 is out. lets look at the upgrade procedure.
Download iTunes

Be careful when you select the device (2G , 3G , 3GS).
Also make sure the file name is correct.
firmware for iPhone (2g) : iPhone1,1_3.1.2_7D11_Restore.ipsw