Removing Kindle Ads (3.2.1 firmware)

Sample K3 Advert

I bought a Kindle 3 about six months ago and have been throughly enjoying it.  Unfortunately, as I was getting ready to go on holiday, I dropped it and bashed in the screen.  I was pretty bummed that I didn't have all my portable reading goodness to take with me.
I called Amazon and they were super friendly and helpful and offered to replace the Kindle at the standard $60 replacement fee plus international shipping.  I thought this was a great deal and was really impressed with the promptness of the service.  From a customer service perspective, Amazon was fantastic.  They even delayed shipping for a few days for me because I was going to be out of the country and couldn't accept delivery.  Wow!
I was a little sad, however, when I opened my new kindle up and I was greeted with some awful ads along the bottom of each screen.  Apparently there is a new "Kindle 3 Special Offer"; it is a regular non-touch screen Kindle offered for a special lower price and is advertisement supported.  I think this is a great deal if you're looking for a cheaper device. I however, was not.
I wasn't given the choice of opting in or out, I was only offered only a replacement Kindle.  Had I been offered one or the other, I probably would have chosen the ad-free version and willingly paid more.  I feel like I'm bombarded with advertising all the time when using electronic devices and the Kindle is was the rare device that transcends most e-devices and offers a very sedate and stimulus free environment.  It almost reminds me of one of those dead-tree things we used to keep on our shelves.  What were they called?  Oh, yeah, books.
I probably could have gotten over the ads eventually and ignored them, but that's just not my style.  Instead, I hit the google and started hacking.
Keep reading after the jump if you're interested in a more comprehensive guide that covers jail breaking and disabling the ads on your Kindle.
I strongly believe that if you knowingly and willingly opted into the cheaper Kindle, you should hold up your end of the bargain and live with the ads.  From what I understand, you can pay a bit extra and have them disabled if you find them too distracting.
UPDATE 23 October
I just chatted with a rep from Amazon and he disabled the ads for me; I wasn't supposed to get a "special offer" Kindle.  All it took was a factory reset and my Kindle is ad free!  That was probably easier than all the junk I did below...

This guide has been compiled from a variety of sources listed at the end of this guide.  These steps worked for me and caused no harm to my new K3.  You can possibly brick your device, rendering it useless and cause yourself all sorts of problems that are not covered by your warranty.  Your mileage may vary and the inflammability of your pets is your responsibility.

Step One - Jail Break The K3
Jailbreaking simply means to alter your device and gain root (administrator) privileges.

1. Download the jailbreak package from Yifan Lu
2. Unzip the package and locate the appropriate file for your kindle
• k2 = Kindle 2 US
• k2i = Kindle 2 International
• dx = Kindle DX US
• dxi = Kindle DX International
• dxg = Kindle DX Graphite
• k3 = Kindle 3 Wifi + 3G (US & Canada)
• k3g = Kindle 3 Wifi + 3G (Elsewhere)
• k3w = Kindle 3 Wifi
3. Plug in your Kindle via USB and copy the appropriate file to the root of the device.  In my case it was update_jailbreak_0.5.1_k3w_install.bin for a K3 WiFi only model.  Check the README.txt if you are unsure.
4. Ensure your Kindle is fully charged.
5. Install the update by pressing Menu > Settings; Menu > Update Your Kindle
6. Allow the Kindle to reboot and install the update.

Step Two - Install USB Network access

USBNetwork access allows you to telnet or ssh to your device over the USB cable.  It can also be configured to allow remote access over WiFi.  Once installed, you will be able to access the 

1. Download the USB Network package 
2. Unzip the package and locate the appropriate file for your Kindle
3. Plug in your Kindle via USB and copy the appropriate file to the root of the device.  In my case it was update_usbnetwork_0.35.N_k3w_install.bin for a K3 WiFi only model.
4. Ensure your Kindle is fully charged.
5. Install the update by pressing Menu > Settings; Menu > Update Your Kindle
6. Allow the Kindle to reboot and install the update.

Step Three - Disabling Ads

The advertising daemon looks to a directory called /var/local/adunits.  If that directory is unavailable, the standard "Dead Authors" screen savers will be shown instead.  This will also disable the banner adverts.

1. Open a search box by typing any character on the keyboard.  Delete the text and type the following:
• ;debugOn
• ~usbNetwork
2. Plug your Kindle into your computer via USB.  Sadly, I only have information for a Mac. Under Windows, you may be able to find more information here. On a Mac it should prompt you that a new RNDIS/Ethernet Gadget has been connected.  Choose to configure the device as follows:
• Configure IPv4: Manually
• IP Address: 192.168.2.1
3. Open a terminal and connect to the Kindle via telnet:
• $ telnet 192.168.2.2
4. Once connected issue the following commands to enable continuous connections
• # /etc/init.d/netwatchd stop
5. Mount the file system as read/write
• # mntroot rw
6. Make a backup of the advertising files
• # mv /var/local/adunits /var/local/adunits.bak
7. Create a dummy file in the place of the advertisements:
• # touch /var/local/adunits
8. Exit the device and disconnect:
• # exit
9. Disable usbNetworking and turn off debug mode by again bringing up a search box and typing the following:
• ~usbNetwork
• ;debugOff
10. You can test the usbNetwork status by plugging the Kindle into the computer again; if you properly disabled the usbNetwork, the Kindle should show up as a removable device.  If it does not, try teleneting to it again.  If you can connect, you have not yet disabled the usbNetworking.  Repeat steps 1 and 9 again.
11. This should entirely disable the advertising on your Kindle 3.

You can leave any questions below.  Good luck and try to be honest.

Sources:
Kindle 3.2.1 Jailbreak
http://yifan.lu/2011/09/01/kindle-3-2-1-jailbreak-update/
Installing USBNetwork Hack
http://www.mobileread.com/forums/showpost.php?p=1181285&postcount=8
Disabling Kindle Ads
http://tasoli.com/forum/viewtopic.php?f=10&t=124