I just saw this thread. There are some misstatements.
My regular phone is a 6 plus. My old iPhone 5 has been used as an iPod Touch since I got the 6 plus. The sim in it was zapped by ATT when I moved my number to the 6 plus. Thus, it's not an "active" sim and can't be used again.
I've been updating the iPhone 5 regularly since March of 2015--without having an active sim card. Everything has worked perfectly. I obviously can't call using that phone, but it's a really nice iPod Touch with WiFi.
If Apple has stopped allowing older iPhones without active sim cards to be used as an iPod Touch, then that's significant for me. I definitely won't do the 9.3 update until I learn more.
Jittro...thanks for the heads-up.