I had this problem with my iPhone 4S and I tied everything, even two restores. The new iOS burned out the wifi thing. I had to get a replacement phone from my nearest Apple store. My phone is still in warranty, but if yours is not, you have to pay the price you bought it for. I bought my iPhone 4S when it first came out so I would have to pay $199 for my 16GB. If you do end up bringing it to an Apple store, make sure your stuff is backed up to iCloud! I made the mistake of only backing it up to my computer and then when I got there, the guy advised me not to restore from the old update because of corrupt data.
if you need a quick fix before getting it checked out, you can take it out of the case and stick it in the freezer for a couple of minutes. As soon as the phone heats up, the wifi grays out again.
Hope this helped!