it does work.
i have got an iphone which was shipped diretly from usa.
it is an unlocked version and works fine. im using a 3 pay n go sim card with a £5 data allowance add on and it works great, it picks up orange opposed to 3 and uses orange's edge - rather slow but its meant to be the best one around . o2's edge support is very very very poor, tmobile and vodafone are expensive.
i can make calls, send txts, take pics, use the ipod, surf the net, access my emails, everything that the usa guys can do - apart from visual voicemail - i dont really mind this since i rarely ever get voicemails anyway ...