great news! Not that i plan on having my service shut off... it can happen from time to time. 🙂
Good to hear all other functions other than cell/internet service is available.
But when it comes to the internet, if you are in a wifi area and your cell phone service is shut off... can you hop on the wifi and still access the internet?
If you lose or deactivate service, like the other said, it'll just become an iPod touch. However, if you want to upgrade to a newer firmware in the future, you'll need service because when you sync it with iTunes it'll want to register/activate and if you don't have service you'll essentially have an iBrick.