You can upgrade your Iphone 4 to IOS 5.0 but not to IOS 5.0.1 or 5.1.

I had upgraded my iphone from firmware 4.3 to firmware 5.0 and used redsn0w_win_0.9.9b4 to jailbreak. This jailbreak is only tethered.

Visit this website if you would like to know about tethered Jailbreak.

http://lifehacker.com/5857938/the-pros-and-cons-of-a-tethered-jailbreak-...

Hope it helps.