when the wifi radio and 3G radio are running at the same time it causes more battery drain, which heats up the battery.
if the screen is on, its even worse, it gets hotter.
First of all dont over use the tethering. dont think you can use it as your main internet connection for a laptop or otherwise.
second, keep the phone plugged in with the screen off, that reduces drain and keeps the phone under constant power.
third, it WILL get hot. you cannot change this. thats how the device functions, thats how energy is transferred and lost as heat, its physics. just keep the phone on a cool table or something.
I used to take the battery cover off and put the phone face down.