If you can't get USB to work, you have three other options.
- Download the zip file using your phone's web browser instead of your computer. Unzip the tacoroot file on the phone, and inside it will be a zip file for the 2.3.3 RUU (ROM Update Utility). Rename it to PG32IMG.zip.
- If you have the file on your computer, take the SD card out of the phone and put it in your computer's SD card reader. Then put PG32IMG.zip (see option #1) on the SD card and put the card back into the phone.
- If the is on your computer but you don't have an SD card reader, install ES File Explorer on the phone and then transfer PG32IMG.zip (see option #1) to the phone using either an SMB share on the computer or the ES File Explorer's FTP server (called Remote Manager in the left sidebar). Option #1 is less work, but this way wastes less bandwidth if you already have the file on your computer, because it would be file transfer over the local network instead of over the Internet.
Once you have PG32IMG.zip at the top level of your SD card, restart the phone while holding down power and volume down. This should take you to the bootloader. Inside the bootloader (or maybe fastboot, which you can get to from the bootloader), the phone will scan the SD card, detect the PG32IMG.zip file, and ask if you want to install the update. Plug the phone into a charger, then say yes. DO NOT POWER OFF THE PHONE WHILE IT INSTALLS THE RUU.
Restart the phone. The phone will now be in a fully factory default state with 2.3.3 but will still have S-OFF. In other words, the 2.3.3 RUU should solve the USB problem you mentioned.
Remove PG32IMG.zip from SD card, using either your computer or a file manager app such as ES File Explorer. Install TWRP custom recovery using the "Download - Recovery Image Method" steps on this page: http://teamw.in/project/twrp2/71
Once TWRP Recovery is installed, you'll be able to use it to install custom ROMs, kernels, gapps, etc. Other custom recoveries you could use include the latest version of 4EXT or the latest version of ClockworkMod.