I activated the old phone with the new sim in it. Notice on iTunes saying wait for an email. I got an email from AT&T saying we'll let you know when it's activated, then another when I was told it was.
Somewhere in there I was asked to pay $20 for the 2g iPhone Data plan
. I agreed (AT&T will fix that).
Then the 2g had service and I put the card back into the 3g where it belonged and that worked also.
NOW - his 3g's SIM can be swapped back/forth just fine.
I didn't have to do any of this with my 2g/3g iPhones. Odd.