iPhone 3GS or 3G (software unlocked by redsn0w/ultrasn0w & similar) going from full signal strength bars to 1 bar to no bars, both 3G signal and wifi, to SEARCHING… to NO SERVICE, back to full bar signal strength, repeatedly, randomly especially with location services / GPS running (mouse pointer arrow visible in top right of iPhone screen) is because you’re using version 6.15.00 modem firmware (commonly called a baseband or BB) on your iPhone 3G/3GS.
Downgrade iPhone modem firmware to 05.13.04 to fix searching/no signal iPhone 3GS problems using redsn0w version 0.9.14b2 for OS X or Windows. Instructions and downloads are available from iPhone Dev Team:
– basic instructions on using redsn0w to downgrade modem firmware from 06.15.00 to 05.13.04
6.15.00 modem firmware used for software unlocks of iPhones is meant for iPad, not iPhone. (Find your iPhone 3GS / 3G modem firmware version in Settings –> General –> About –> Modem Firmware (near bottom). Format is MM.mm.pp.
From my little experience with jailbreaking & software phone carrier unlock iPhones, using iPad modem software on an iPhone 3GS / 3G is not a good solution. Sure, your iPhone 3GS / 3G is unlocked, but your iPhone is barely operational, constantly dropping and searching for wireless signals during which the iPhone is useless especially when GPS / location services functions are running.