I just did this procedure with my Kindle 3 with SO and it works GREAT!
It downgraded from 3.4 to 3.0.2 and the special offers are gone and original screensavers are back. Does anyone know if it will try to update back to 3.4 again once I get on wi-fi or 3G, or maybe this is a fix to remove special offers? I personally prefer the 3.0.2 version. It's what I originally had on it last year. I love how the location you are at in a book is displayed on the bottom and you don't have to hit menu for it to display because it's hidden with 3.4.
If it does update then I guess I'll have to flash it all over again and not turn on the wi-fi or 3G LoL