first off this phone was not unlocked I used the new version of i tunes 8.1 and trying to upgrade to 2.2.1 firmware my t mobile sim card will only work in emergency mode only. when connecting to itunes it says sim inserted is not supported.

There is no software unlock for FW 2.2.1. Sorry about that.

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I just want to share some news here... i am not sure if someone else has also found this is working. this is actually a method to unlock baseband 4.22.01 iphone 3G

Today at afternoon, while I was retreating my car from car park, my phone rang and a friend of mine, Ben excitedly called announcing that he seem to have found a way to unlock the 3G iphone with the latest baseband 4.22.01. He mentioned that he was actually calling me from the 3G Iphone via the Maxis network. This is amazing as I yet to hear that it is openly inform that the 3G Iphone at baseband 4.22.01 was unlockable.
He later shown me the Iphone 3G at baseband 4.22.01 and here are the steps by steps he had taken. I would not be responsible for the unlock success but he really had done so.
1) from baseband 2.30.01, upgrade to firmware 2.2.1
2) upgrade to firmware 3.0beta and the baseband will be at 4.22.01
3) use quickpwn 3.02 and jailbreak and activate options
4) at completion of quickpwn 3.02, force downgrade to firmware 2.2 thru itune restore
5) error code 1013
6) phone restarted
7) use a no pin lock sim and connect to itune again
8) let itune sync and work on
9) phone unlock success
10) telco signal detected with baseband 4.22.01
The steps could miss out one or another but fundamentally it require upgrade to higher baseband then downgrade via firmware 2.2.1. Forget the error code 1013 and activate the phone and hopefully even at baseband 4.22.01, the phone had been unlocked just like the phone shown to me. I will post a photo with baseband and the telco signal soon.
Great trial!

refer to my blog (not iphone specific!) for the photo of baseband 4.22.01 with local telco signal
my apology for the blog as not really an iphone site but instead a memorial to my late wife (mykmchong.blogspot.com)

Very very unlikely.

your friend is using the phone with an Apple approved provider/SIM therefore the phone worked. The baseband is not unlocked.

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Please CKMCSK:

After 6th Step (To restart the phone) What Sim Can I connect it to synch with iTunes? because if you put the free sim iTunes'll make CAN'T ACTIVE WITH THIS SIMCARD!!! I'd try to jailbreak after Downgrade to 2.2 but it was'nt be unlock!!!