I've read several posts from people on MacRumors that indicate they have had success taking the phone to the Apple store and working with one the "geniuses."
you can buy iphonesimfree software for 60 dollars and you should be fine but you have to downgrade to 1.02 or go to the iphone dev wiki and you should be fine
There is a way to do it without SimFree now.... I belive you can downgrade the baseband and bring it back to 100% 1.02 working condition. Check the dev team wiki for instructions.