The iPhone Dev Team has just released the third beta version of Redsn0w 0.9.7 to convert tethered jailbreak of iOS 4.2.1 to untethered on iPhone 4, 3GS, iPod touch 4G and iPad. The third beta is still for testing only so stay away if you rely on your device or care for an unlock.
Redsn0w 0.9.7b2: fixes all the native app crashes (including Task switcher). This is the only change from the first beta that was released earlier today.
Redsn0w 0.9.7b3: This version extends the fix made in beta2 over to the non-GUI programs too (like the daemons that handle media content). So now embedded videos in iTunes work. Just follow the guide posted here to achieve the untethered jailbreak for iOS 4.2.1.