I was experiencing the same issue as he was, and I was trying to see if it was due to the ROM. I went to the market and downloaded the latest tether app and it still didn't work. I did a little more researching, and a post in this thread reflected this post:
android-wifi-tether for those with root - xda-developers
Basically, the long and the short of it:
1) create a directory on the sd card titled android.tether
2) download the bin file referenced (you can find it
here)
3) copy the bin file into the directory created in step 1
done.
If it still gives you issues, uninstall the wireless tether and reinstall it. Like I said, I was in the same boat until about 5 mins ago. I'm good to go now.
Not saying that your method doesn't work, (I don't know, b/c I didn't try it *lol*) but in case it doesn't work for him, this is what worked for me.