OP, there are two other threads with iphone 4 return stories/nightmares.
1. Return iPhone 4 to Apple Store Nightmare
https://forums.macrumors.com/threads/955044/
2. My Experience returning iPhone 4
https://forums.macrumors.com/threads/967504/
and here's my story (apologies for repost from #20 in second thread, i guessed its easier to read here for folks who haven't seen it than put the link)
I had a very similar experience, when I returned my iphone 4 today.
1. Called apple (wait time 22 minutes). Advisor says "easiest way to return your phone is to take it to the nearest apple store. But remember to port your number to the old phone before you take it to the apple store"
2. Called AT&T, they said "No you return the phone to apple and then come to us; we'll give you a new sim as we cannot activate the old sim".
3. I took my old phone to AT&T first. They give a little resistance about not being able to port the number. I told them that I spoke to apple support and they asked me to get the number ported before returning so I have a working phone after I return. They grumble and replace the old SIM on my 3G. No additional charge.
** Now my 3G phone works and the iphone 4 does not. I reset the iphone 4.
4. I take the iphone 4 to apple store and they tell me that they cannot process the return of an online ordered iphone 4. They show me a device that they use for managing iphone orders and tell me that the device does not recognize online orders. So I have to call online support. I tell them that online support asked me to take it to the apple store in the first place!
5. Apple store calls apple online store (45 minutes wait time). They haggle and fight between themselves. I overhear the online store wanting a 10% restocking fee and shipping for the return. Apple store supervisor gets involved at this point; she explains some internal memo on July 10th that indicates no restocking fee or shipping; and how they have processed similar returns. Some silence and am informed that I will get two emails, one from apple online store confirming the return and the second from fedex with the shipping label.
6. The 2 said emails arrive in my inbox. I thank the (friendly) apple store employee and supervisor for putting up with me at the cash counter for an hour and 30 minutes. Get to fedex, print the shipping label, pay $10 for packaging and ship the iphone 4 to the online store returns center in PA.
So if anyone else reading this thread, planning to return the iphone 4. Please call them during odd hours (say 1 AM or 6AM) to have a shorter wait time. Else you have a 45 minute wait time. Please don't fall into the trap of paying the restocking fee or shipping the product back. Its defective, its does not work for you and its not right for you to pay for the shipping or restocking. And plan on spending atleast half your day completing the return!