Using the Iphone withOUT a sim card.

When restoring or updating it MUST activate again with SIM card that was in it last time it was activated (not sign up for service, just activate).

So by restoring you locked it down without a SIM.

It means that it will do nothing until an active sim is put in it.

You cannot restore or update without an active SIM or the previously active ( now -de-activated) SIM that was in the iphone when it was active.

You've actually got two problems that need to be addressed before you'll be able to restore your phone- 1. You need a deactivated AT&T sim, no way to get around that fact. 2. If your profile is correct, your computer won't be able to restore the phone even if you get the sim card deal straightened out. See here:

Mac system requirements

* Mac computer with USB 2.0 port
* Mac OS X v10.5.8 or later
* iTunes 9.2 or later (free download from www.itunes.com/download)
* iTunes Store account
* Internet access

Since iOS 4.0.2 is the only OS currently available from Apple, you won't be able to restore until you upgrade your computer's OS.

That will not work, you need 10.5.8.

so where do I get a deactivated sim card

AT&T store.

I am in the same situation. I want to give away my old iPhone 3G. The new user will only be using the iPhone with Wifi and no cell service. I am doing an "Erase All Content and Settings" reset. I was told I need to also keep the SIM card. However, if I do that then the new owner will not be able to sync the iPhone to their iTunes account. I want them to be able to use the iTunes store with this iPhone. If I give the SIM to the new owner of this iPhone some say I might lose personal data (even though the SIM card doesn't hold contact information).

So what do I need to do? I don't want my friend to have to buy a new SIM card just to use the iPhone as basically an iPod with apps. How much does AT&T charge for the SIM cards anyway, if you don't want the service?