Is it possible to update iPhone4  to a provider-neutral OS so WiFi hotspot can be enabled?
It is not a carrier localized version of the OS that is installed on the iPhone. There is one iOS release image for each hardware model. What changes for each mobile network is the carrier settings, which is downloaded either OTA (iOS4+) or by iTunes when the phone is activated or connected and an update is available.  

If you have the released from any carrier lock then if you move to another mobile provider supporting the tethering feature then their carrier settings will enable the preference.