I had trouble for months getting Mobile Hotspot to work. recently I bought a second N900 (they're cheap second hand) as backup. And with a clean install of PR1.3 and Powerkernel, I got Mobile Hotspot working. It took a couple of reboots, but fine.

Then of course I had to get my original N900 working too. I noticed some stubbornness of choosing my wireless as prime connection. So I uninstalled Wifi Switcher, and that did the trick. I run Wifi Eye too, it gives no problems.