Guys,
I did create a posst for this, but it's slipped to page two and without me bringing it back up, I think it's lost. Perhaps someone could help?
Cleaning old iPhone
First up, make sure you do a full backup from your 3G. This means setting up your new iPhone is a simple as restoring from this backup. Don't worry, it won't "downgrade" the iOS. You can then return your 3G to factory settings ready for your Dad.
Sim Swap
Exactly as simple as you outlined. Some of the hardy folks in this thread had their micro-sims working very swiftly after using the O2 online SIM migrator. If you want things to run even smoother on the day, pick up a micro sim in advance. You can always use the sim adapter to use in your 3G until Thursday.
iTunes Sync & Transfer of Data
As mentioned before you can simply choose to restore from your 3G backup, or start fresh and re-pick your music/pictures/videos/apps. Contacts etc will sync once the correct boxes have been ticked. iTunes makes the whole process of upgrading (and restoring if needed) so easy.