thanks for all the help guys. steps i did if others have the same question. skip step 2 & 3 if you have no intention of jailbreaking.
(1) received phone in the mail (already activated)
(2) connected to computer, new device detected - did a new quick iPhone sync when device detected. made sure i could make a call and do text messages.
(3) did the jailbreak thing using Quickpwn. wow, took several hours downloading .Net 3.1 with .net 3.1 SP1 (as recommended somewhere here) then downloading the 2.2.1 restore image from apple. but now that i have the files, i could restore quickly if i have to.
(4) when connecting after jailbreaking, new device detected - used the iPod Touch backup. can take awhile depending on how much data is being restored. after, make sure i could make a call and do text messages.
(5) done. worked perfectly and my high scores have been retained!!