What a cluster f*&k!
After 5 hours of dealing with this I'm finally straight... I also followed the directions from the AT&T email and they screwed me up. Ended up at the AT&T store and they were worthless. After burning thru 2 sim cards I finally called Apple. They were helpful, but couldn't resolve the issue. They got me in touch with AT&T again, but this time the rep was amazing! He knew what he was talking about and knew where the other people screwed up. I got his, and his boss's, email addresses to thank him for his dedication to getting this done and his knowledge.
There seems to be 2 sets of directions floating around out there, and I think the right way is to activate the phone before trying to do the swap...
The new iPhone sure seems awesome so far... once activated!