I have an iPhone 2G (bought from friend)
New AT&T Sim card that only allows emergency calls (bought from AT&T store for 25$)
My problem: I get to the last step of iTunes activation, and then it says "Wait about 3 mins...", so I wait. After about 5 min, it says "We could not complete your iTunes store request. The network connection timed out." and then tells me to reconnect.
iTunes/Apple may be down at the moment; if it persists, I'd say send someone an email or simply take it into the store (AT&T or Apple) and they'll give you some help.
I went to both and they told me I have to activate through iTunes, but when I call they say the number has to be activated and then the phone... seems like these idiots can't make up their minds >_>