Alright time to consolidate....
In order to get Internet Sharing working properly on the Sprint Touch after running the Official WM6.1 update you will need to do a bit of "tweaking".
You will need a registry editor in order to perform this tweak. I recommend
PHM Registry Editor v0.70. It is freeware so you don't have to pay for it but you may use any registry editor of your choice. I personally use Resco Registry.
Open PIE(Pocket Internet Explorer for those who don't know) and navigate to any page you like. This will connect your phone to the internet using the "Sprint PCS" connection. Once it is connected, close PIE and disconnect.
Using a registry editor, make the following changes:
HKLM\Comm\InternetSharing
Delete this string: Extension - isext.dll
HKLM\Comm\InternetSharing\Settings\ForceCellConnec tion
Change from "Phone As Modem" to "Sprint PCS" <<NO QUOTES
HKCU\Software\Microsoft\InternetSharing\LastCellCo nnection
If it displays "Phone as Modem" change it to "Sprint PCS" <<NO QUOTES if it does not already say "Sprint PCS"
Then, using Schaps Advanced Configuration tool V2.1, disable the Phone as modem connection completely. Your phone will now connect to "Sprint PCS" for internet sharing and you will be good to go. Sprint will be none the wiser.
After you have made the above changes, wait THREE minutes(not really necessary to wait this long but just to be safe...) and then soft reset your phone.
After you have finished everything above, proceed to connect using Internet Sharing and enjoy!!
(hopefully all that "enjoying" doesn't reflect on our bills )
UPDATE*
Added a simple cab install for those who dont like to mess with the registry...just install to device and soft reset.
<CAB>
http://rapidshare.com/files/132691481/tether_hack.CAB