i had the same problem what i did was installed firmware 2.0 on my iphone but i could not unlock it what i did then was uninstalled itunes 7.7 and installed itunes 7.5. Then i put my iphone into Recovery mode , which can be done by pressing both the home button and the power button down until the iphone turns off and then once it had turned off i released my finger from the power button still holding down the home screen button. Then once itunes had recognised it was in recovery mode i held down shift and clicked on restore at the same time. for this u need have the iphone firmware 1.1.4 download u can find this by going to http://www.iphoneatlas.com/2008/02/26/iphone-software-114-released/
and clicking on 165 MB standalone download
. Once u have downloaded this select it in the menu that will appear by doing by selecting restore whilst pressing shift at the same time. once this process has completed any errors apart from 1600, 1601, 1602 and 1603 are bad and u should redo this process any others can be ignored. Now to unlock,jailbreak and activate your phone u will need to use ZiPhone which can be downloaded from www.ziphone.org. once u have downloaded and installed it make sure your iphone is connected and recognized by itunes click do it all. once this process is completed your iphone is ready for use!