GPRS does not work on iphone pay and go with O2, they use a proxy that is not compatible with mobile web. I would recommend getting a simplicity sim only deal from the O2 website. This will let you browse the internet and you can get an unlimited data bolt on for £7.50 per month. That should have you sorted.
i have been on the o2 pay as you go 7.50 unlimited web bolt on using 1.1.3 for about a month and it has worked perfectly so i know i can do this i just need 1.1.4 compatible settings