UPDATE 6/21/11: Comments have alerted me to the try experimental version 2.0.8. It does indeed fix the problem. Here’s the link and the QR code: Wireless Tether for Root Users 2.0.8-pre1 *** EXPERIMENTAL ***
UPDATE 12/09/11: CyanogenMod 7.1.0 doesn’t play nicely with Wireless Tether because the baked in tethering services autostart when activating on Wireless Tether. Go into Settings > Wireless & networks > Tethering & portable hotspot > Portable Wi-Fi hotspot settings > Configure Wi-Fi hotspot and change the security to “Open”. This should allow for Wireless tether 2.0.8 
to work correctly.
After rooting my HTC Evo 4G, Wireless Tether for Root Users 2.0.7 worked flawlessly on the HTC Sense ROM.
Once I flashed my Evo to Cyanogen Mod 7.0.2, I re-installed Wireless Tether and it would freeze on the enabling screen after it had access to root. After pressing the Back button and trying again, it would enable, but then give an error message. Wireless Tether for Root Users does not work on CM7.
When I searched the Cyanogen Mod 7 forums, it was suggested to just use the stock tethering capabilities. This is the best solution. I hadn’t thought of this because the standard Sprint tethering doesn’t work unless you pay for it.
Symptoms
Wireless Tether for Root Users is enabled, but notifies “Tethering started with errors! Please check ‘Show Log’.”
Upon pressing Menu > Show Log you read:
Activating WiFi interface... failed
Setting ad-hoc mode... failed
Setting essid... failed
Setting channel... failed
Enabling NAT rules... done
Enabling IP forwarding... done
Tether now running... done
The Fix
After some Googling and checking settings, it appears that Cyanogen Mod 7 doesn’t work with Wireless Tether for Root Users. Instead, the developers included a tether setting baked into CM7. From your homescreen, press Menu > Settings > Wireless & networks > Tethering & portable hotspot and enable “Portable Wi-Fi hotspot”. Works perfectly.
While this method doesn’t include data usage or the MAC address filtering like Wireless Tether, it does allow for WPA2 PSK security. You can also set your SSID (network name) under the settings.
You are the man…same exact problem…would have never figured it out.
on mine is says error
My phone shows error too..
portable wifi hotspot shows error when i sheck it
download cache mate free version run it ..also must use the 2.08 version
easy fix guys ..cache mate.. but you need to be using wireless tether 2.08
2.0.8 experimental does fix it and works pretty well. http://code.google.com/p/android-wifi-tether/downloads/detail?name=wireless_tether_2_0_8-pre1.apk&can=2&q=Generic
2.0.8 does indeed work. Thanks!
thank wireless tether 2.0.8 works perfect
Excellent. It worked !
Many thanks.
I’d +1 the page if it were an option 😉
now you can. Thanks!
uninstall all wifi tether, reboot. no more “error”!! fixed. thanks!!
Yes! I finally got it working after a fair amount of experimentation.
– Rooted inspire
– CM7
– Android Version 2.3.7
– Using Wireless Tether 2.08 (3.0 and 2.07 didnt work for me, I uninstalled them)
– Using “Enable Access-Control” security
– USB Debugging on
This isn’t so much that “they included it”, as it is that they just left the standard Wifi features in their version. (Many carriers remove it, but it is a standard part of the OS).
Great! Thanks Buddy, it works on Mee,
Menu > Settings > Wireless & networks > Tethering & portable hotspot and enable “Portable Wi-Fi hotspot”
There is no “Tethering & Portable Hotspot” in my wifi settings…
Under Wireless & Networks, the USB tethering setting is gray and I cannot click on it.
so its september 2012, I rooted my phone (evo 4g), installed Wifi Tether and it works great, I installed cyanogenmod and the wifi tether fails most of the time. Until this point we are or were in the same situation.
Now , following your method will only let the neighbors access my phone and data for free, how exactly did u fix it ?
I’m using 7.2 cyano..
Is there any way to use internet when you take you r SIM card and insert it in another phone?
On my rooted cm7.1.0 built by user “pookey” for the DroidX, there is no option for tethering and portable hotspot. I installed this app and get the errors you describe here. I’m on the Page Plus Wireless network (Verizon towers).
There was another tethering app using the usb cable I iinstalled which works, but I’d prefer the wireless hotspot. I was under the impression this was built into cm7 and no apps are required. Your article reflects that, but my phone doesn’t even have a menu item!