MuscleNerd of iPhone Dev Team, a little ago confirmed that redsn0w 0.9.6 is compatible to jailbreak iOS 4.2 beta firmware. But it won’t be so perfect as jailbreaking iOS 4.1 or lower with redns0w 0.9.6. You might face some problems. Here is how you could jailbreak iOS 4.2 with redsn0w 0.9.6.
The guide given here is similar to that of jaibreaking iOS 4.2 with redsn0w 0.9.6 except that you should point at the iOS 4.1 firmware instead of 4.2.