Using iPhone as iPod touch I am trying to use an old iPhone 3GS as an iPod touch.  I left in the old sim card and connected it to iTunes but it will not activate.
This should work, but might not be ideal - get a pay-as-you-go (i.e., non-contract) SIM with a small amount of credit on it (I suppose not everyone has them lying around) and activate it with that (it needs to be on the same network that the phone is locked to) and then disable all the 'phone' functions. It should then function just fine.