Everything your doing is correct.
As far as O2 disappearing when you go into a weak area. I would conclude that to at least be normal. Maybe hopping onto another carrier for the time being till you hit another O2 tower, or possibly no service at all in certain areas which does happen Global wide.
A couple things I can suggest are posted below. If it does not help you the last thing you may want to do is get SIM card replaced and or iPhone replaced if needed. But only after contacting O2 and confirming your account and settings on their end look ok.
1. Reboot iPhone - Hold down the Home button & Sleep/Wake button. And wait for the silver apple logo. Now let go. Allow iPhone to reboot. Now wait and see if the network goes out again.
2. Toggle Airplane mode on for 1 min. Settings - Airplane Mode - Turn on for 1 min, then turn off. Now see if network goes out.
3. Reset network settings - Go to Settings-General-Reset-Reset Network Settings- Confirm, iPhone will reboot. Now see if network goes out again.
4. Remove SIM card, Gently clean it with a soft cloth, put SIM card back into iPhone, and see if network goes out again.
http://docs.info.apple.com/article.html?artnum=305746
5. Restore iPhone - Backup all content on the iPhone. Please keep in mind iTunes does make a backup but you want to ensure you have separate backups of your other files. Please do not rely on your iTunes backup as your only backup. Once your data is backed up, Connect iPhone and restore it. If network goes out again proceed below
6. Contact O2 and consult them if this could be something with your account settings or the SIM card itself. If they say they SIM, get it replaced and see what happens.
7. If this continues to happen please consult your local Apple Support line for assistance with possible iPhone replacement.
