Just wanted to confirm that Personal Hotspot does work on the iPhone 3GS and it is indeed possible to pair it with my iPad 2 WiFi only!! Yay!!
It requires iOS4.3.
One “funny” thing is that I had updated my iPhone 3GS to 4.3 but there where no “Personal Hotspot” available in the Settings. It turns out that I had to reset my network settings, AND to use the “correct” reset button.
For me it did NOT help by using the “Reset” under Settings->General->Network>Cellular Data Network->Reset Settings”.
But when I used the General->Reset->Reset Network Settings, the iPhone 3GS rebooted and at restart the Personal Hotspot was indeed available under Settings->General->Network !
On the iPhone 3GS the Personal Hotspot uses Bluetooth and does not use WiFi sharing as in the iPhone 4. So you will have to activate Bluetooth on both devices and pair them to get it to work.