1. Make sure your phone is updated to 1.1.4 in iTunes
(if your phone has been jailbroken before - remove all 3rd party apps before re-jailbreaking)
2. Sync with iTunes one last time to create a backup of your current information. Shut off iTunes but leave the iphone connected by the USB cable. Go into the iphone's settings Settings>General and set Auto Lock to Never (this makes sure the phone doesn't turn off during the process)
3. Download ziphone http://download.ziphone.org/ to your desktop on your Mac/PC and then run the ziphone. Chose JailBreak from the menu. The program is written well and will tell you what to expect, the process doesn’t take long and when its done the phone will reset itself.
4. Once the phone has returned to a normal home menu Installer
will appear on your home screen, go to Install and then to All Packages, in the search bar at the top of the screen look for BossTool and install it.
 
5. Push the Home button to return to the main screen on your iphone - Hit the BossTool button and choose Free Disk Space and then Relocate Fonts
6. After its done you should see the first line of Disk Space has gone up
to at least 120 MB free out of 300 MB (I would suggest keep BossTool on your iPhone - do not uninstall it later)