Hey there guys!
I'm from Brazil and actually, this issue occurs with a friend of mine. As he doesn't speak english very well, i'm trying to help him out here... so, i'm gonna summarize the whole tale:
We're from Brazil and here an iPhone is much more expensive than in the US (40% more). His brother went to Miami and brought him an iPhone 4 stuck on the AT&T account, not fully unlocked (not sure if at the time we already had the unlocked ones).
As he got here, my friend could not use the iPhone 'cause there were no ways to do it (it was very recent) and, after a few months (3-4), he discovered an specific 'SIM Card' that could help him to use the iPhone in a brazilian carrier. At that moment, he was using iPhone only for games and as an iPod.
After that (using iOS 4.3), he used the iPhone for months. As the iOS 5 was launched, he tried to update, but then started the problems. Even using Jailbreak or not, he was not able to update the iOS to 5. He received several error messages and nothing done at the time was enough to help him. So he maintained the 4.3 iOS version.
Now, for the last 8 months he's facing several freezes, specially while using the camera and/or apps with advertising (almost all). He tried to do almost everything. Turn the Wifi on/off, 3G on/off, everything. Tried to have more than 50% of the HardDisk free, uninstalled all applications, used jailbreak, restore to the original iOS, everything.
We went to see some specialists here in Brazil, and they said that all their efforts on the Software was done, and only a deep analysis at the hardware would be the reason to fix it. They tried to restore, install, update, do anything with different iOSs, but they couldn't even finish the restore/update of the iOSs.
So his final effort was to use the 4.3.1 iOS, which is the only one that 'keeps the iPhone 4 alive'. Even with some freezes during the usage, but no way else to the updates of the latest iOSs. iTunes recognizes the iPhone, starts the update, but several errors occurs and never can be completed.
Anyone has any clues about it!? By the way, thanks for the opportunity to address and share with you our doubts and questions. I'm here to find out a way to restore this iPhone 4 and use it as a normal person.