UPDATE: so here is the basic situation for new readers - in Honeycomb on the Prime, using tether apps worked perfect and the Prime accepted ad hoc network connections so you could tether your Prime to your phone easy. Under ICS on the Prime, the ability has been removed and now the Prime will not seem to allow you to connect to ad hoc networks - those typically made via tether apps with your phone.
HEY before you post up "it works fine for me" do your research & you will see 2 key reasons why some can report it works...
1) they have "native" tether built into their phones - which means it is part of the native built in phones ability
2) they are rooted & have a ROM that has tether cooked into it essentially making it "native"
If your one of these people there is no reason or need to chime in that "it works fine for me". We know & your not part of the issue here but you chiming in confuses the issue if you have 1 or 2.
UPDATE for TF300 users - 5.11.12
According this this user, this mod works on the new TF300
IT HAS BEEN FIXED BY ASUS - 2.31.12
As of this day, the recent .21 OTA update gave us ad hoc functionality back natively!
IT HAS BEEN SOLVED - 2.3.12
Based on a post I read the other day, and that I was asked to test today, I decided to try 1 more time and it worked!! But not how I expected. I tried 3 tests... the final one worked!!
So, here is the process:
1. root is required AND make sure you have your file system app (like Root Explorer) set to make files R/W so you can edit/rename/set permissions
2. turn off wifi
3. go into system/bin and rename wpa_supplicant2 to wpa_supplicant2.bak - that's right folks.. it is NOT wpa_supplicant but wpa_supplicant2 that is running the show
3. download the wpa_supplicant file found here post #24 in my other thread
4. unzip it
5. rename it wpa_supplicant2 NOT wpa_supplicant
6. move it to system/bin and paste it
7. set permissions to xxx, x, xxx (columns) - see more details below if confused
8. go back and start up wifi
9. turn on wifi analyzer and you will see (*)AndroidTether with no red Ad Hoc notation!!
10. click to connect
11. ****ing surf and tether away!!
No rebooting needed, it is instant
I am using the good old original Wireless tether 2.0.7 app I always used! None of those beta releases and picking settings and blah blah
Yes, I was able to connect right back to my local wifi with no issues as well!
PLEASE hit the thanks button, I worked long and hard on trying to get this to work
#7 details if you don't understand permissions settings
When you set permissions (long press the file) a pop-up opens and it shows 3 columns with 3 checkboxes in each. Each "x" is to be checked