Hi following the "hardware" problem I purchased a new iphone 4 as i didn't want to pay £120 for another 3GS only to find a problem on the next update.
However yesterday following reading a few forums i decided to give it one last try - rebooted phone and it is now working!!! I am so angry as 5 staff in 2 Apple shops all said it was hardware. I was in an Apple shop for an hour whilst they tried everything to get it working. Obviously this is not the case and going by the number of threads on this problem it is a massive issue. It's not surprising Apples profits are up if people are having to replace perfectly working Iphone 3s.
Apple have to own up to this it is not acceptable.
I am off back to Apple tomorrow as i am not going to let this rest especially as i am £500 worse off. Will keep you posted