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.