Sorry to tell you but iPhones usually don't support prepaid or pay as you go sims unless the phone is factory or illegally unlocked. You will need to get a real Vodafone sim where you get the bill each month. You don't have to sign a contract since you own the phone but you need postpaid service. The iPhone is a high end product and was never meant for prepaid sims and other low end service types. If you really want to use it spend the money. It's worth it.
Thank you very much for your reply, I had used the vodafone payg sim in it before, so I'm not sure how or why the iOS 5 update has stopped the Vodafone sim working. A lot of others are saying that they have had the same problem with their iPhone 3GS since upgrading for the iOS 5, and saying that the only way to "fix it" is to have an "unauthorized" solution if that makes sense... so possibly having to have it jailbroken? Also, I have tried a contract sim on o2 in the phone and that doesn't work so do you think if I payed for it to be unlocked it would work or am I completely screwed?