Use the Original iPhone as a Wi-Fi iPod
Appleinsider reports that an AT&T spokesperson has informed them that customers upgrading to the iPhone 3G could continue to use their original iPhone as a Wi-Fi iPod:
"If the [original] device is not re-activated as a wireless phone after youve upgraded to iPhone 3G, it will still work as an iTunes player and can access Wi-Fi," the spokesperson said.
This would replicate the functionality of the iPod touch, with the additional ability to record audio and take photographs. If it can be successfully upgraded to 2.0 firmware without service, the original iPhone could also be used to run 3rd party apps and games.
When the original iPhone was released, there had been some interest in using the iPhone as an 'Wi-Fi iPod' by canceling your service, but there had been some initial concerns that this functionality might be later disabled. It appears these iPhones without service do remain functional long after the canceling of mobile service.
Obviously, with the introduction of the iPod touch in September, interest in this possibility dwindled. However, now it remains a useful alternative to selling or otherwise handing down your existing iPhone. Those who wish to activate new service on their original iPhones will be glad to know the original iPhone rate plans are preserved.