Be careful as itunes 8 will not let you do that unless your phone as previously been pwned before (jailbroken unlocked and activated using pwnage tool). If your phone was pwned then you can do it. Visit
blog.iphone-dev.org and read up on the development. Good luck. If your phone hasn't been pwned, then you will have no choice then to downgrade your itunes and then custom build a 2.0.2 firmware and then your phone will be pwned and you will be able to upgrade to 2.1 with itunes 8.0. Here is what you will need to do:
One thing guys: I was able to actually pwn my iPhone 1G (8GB) to 2.0.2 with iTunes 8. The process was smooth and not disrupted by any warnings whatsoever. Although, for that to occur I had to:
a) uninstall iTunes 8 (use AppZapper and remove all relevant plists along),
b) reinstall iTunes 7.7 (download it from Apple's repo),
c) restore iPhone to original 2.0.2 with iTunes 7.7 (make sure you restore directly within iTunes and download the .ipsw accordingly),
d) install iTunes 8,
e) create the custom ipsw with pwnage (you can save anywhere, but I kept my file neatly on the desktop),
f) DFU iPhone and restore with the custom ipsw in iTunes 8,
g) there you go, everything works and the monkeys are happy.
Throughout the process i did use the original AT&T sim card, and after successfully accomplishing the tasks, switched to my lovely unauthorized provider.
and here is the comment from the dev team themselves:
Syncing to an already pwned device works fine.
It's only when you try to restore to an ipwned ipsw from a non-ipwned device that iTunes 8 starts to try to get in your way.
So they can detect a ipwned ipsw but not an ipwned device? For now?
Yes. They can detect (or more accurately, avoid) an ipwned recovery ipsw from Device Support.
Already pwned devices are no problem.
It's just getting to pwned that Apple is now getting in the way of. But very weakly.