At this point, try a different computer. It doesn't matter where the IPSW is located. You could even copy it onto a flash drive, along with redsn0w, and try Pwned DFU and use the IPSW on someone else's computer (if it has iTunes). If you wanted to update to 5.1.1 last resort, after trying other computers doesn't work, you would just click Restore in iTunes without choosing an IPSW. Yes, you can restore to an iCloud backup from any firmware.