Here is what I used to set up wireless tether (it is old but still works)
If you want to WiFi tether, keep going, otherwise skip this section
All new kernels/ROMs should have WiFi tether, but if they don't you will need to download the apk file from here and install it using steps 56 or 57.
56. You can either download Astro File Manager (free, not a bad program) from the market....
57. ...or Root Explorer (paid app, much much much better and something we will be using later on the guide).
58. Make sure under settings > applications you have "use unsigned applications" or whatever it says. Top box. It will give you a warning but just ignore it.
59. Navigate to the file you just downloaded and click it. Do not explore the file in Astro, but choose open and install. In Root Explorer just choose install.
60. My settings for WiFi tether are...uncheck use Bluetooth, check Enable WiFi Encryption, set up a passphrase (make sure it is 13 characters), change the SSID or leave it default (I left it default), Change channel to 07, power mode active, enable access control unchecked (my preference), change LAN first option, everything else left it the way it was.