here's the response from the original submitted
Had two phones to set up: one for me and one for my wife. Accidently plugged in the wrong phone (Phone #2 in step #4), after I had initially began registering the first phone the day before. It was a pretty stupid mistake and I forced phone #2's activation through thinking it wasn't working with the same number.
I have spent all day on the phone with Apple and AT&T to fix this issue - apparently, the steps outlined below cause a serial number database mismatch between the IMEA numbers stored in databases at Apple (iTunes) and at AT&T. Additionally, AT&T's database does not see Phone #1 anymore when you 'overwrite' the information using the same cell phone number (e.g. Cell phone Number X). Apple's database sees Phone #1, but not Phone #2 for some reason - hence the partial activation (and unlock of its features).
This does not produce a fully unlocked phone that can accept any simcard - it simply allows an individual to semi-activate an iPhone to use most its features over WiFi (e.g. Youtube, Mail, etc) without a cell number association (thus and a bill from AT&T) on a phone. The phone will always display a quick message "waiting for activation from AT&T" at boot up, but will then allow you to use the phone's features (except ones that need the cellular network).
Let X= 'a phone number you want to port over from another carrier' (e.g. 888-555-1212)
6.) Fill in the information re-using "Cell Number X" as the primary phone number again - it will over-ride the first registration. Allow the iPhone #2 to fully-activate using this number. This phone should work with this .
7.) Plug in iPhone #2, it will unlock the phone for use (not necessarily with another carrier), but without a cell phone number assigned or an account from AT&T. This phone will be in a semi-activated state.