RedSn0w can jailbreak iOS 4.3.5
RedSn0w can perform a tethered jailbreak on iOS 4.3.5 for all devices except the iPad 2, according to MuscleNerd's tweet:
So those who really do want tethered 4.3.5 can use redsn0w pointed at 4.3.4 (except iPad2)
We strongly recommend NOT to update to iOS 4.3.4 or iOS 4.3.5 to preserve untethered jailbreak. We will soon post step-by-step tutorials on how to perform iOS 4.3.5 tethered jailbreak.
You can download the latest redsn0w here.
UPDATE: Here are latest step-by-step tutorials to jailbreak iOS 4.3.5:
iPhone 3GS
Tethered jailbreak iOS 4.3.5:
iPhone 4
Tethered jailbreak iOS 4.3.5: