My experiences so far with a brand new UK Iphone.
O2 allows you to take these from the store without signing up for the contract in the same way that ATT allows you (suckers...

) so I thought it was worth £269 of my hard earned wedge to try and figure out whats going on.
So far I have been able to succesfully Downgrade to 1.1.1, and to 1.0.2 and activate both times.
One thing I noticed, but can't figure out whats changed.
1.02 When activated allows any O2 SIM, 1.1.1 doesn't ? So anyone that wants a brand new activated O2 Phone without the 18 month expensive contract stick with 1.02
I've been trying to re-flash the baseband but it seems locked. Every time I try it looks like it completes fine, but still have the same baseband.
My US ATT Iphone does allow me to upgrade/downgrade at will and I can change the baseband pretty much at will. I can upgrade and unlock 1.1.2 quite easily.
Will keep you posted on my experiences with the new UK phone as they happen, and if anyone has any ideas what gets changed between 1.02 1nd 1.1.1 to prevent using any O2 Sim card it would be much appreciated.