My sister just handed me one of her old iphone but when i am trying to use it, it is showing iphone is disabled ,please connect to itunes and when i ma trying to use it in recovery mode it is asking for update and when doing so it is showing error.

Well my sister lives in US and she just handed me her old iphone 3gs. The phone was locked to AT&T .While trying to acees it an error message is popping up that Iphone is disable,Please connect to itunes.Well i downloaded a new version of itunes and while connecting it in recovery mode and tryuing to update it it is giving an error.i asked my sister to unlock the phone so i could use it on any network .she has applied for it and will get the code in one week. What should i do?? Please help.