Thinking of buying a 3G iPhone from eBay in anticipation of an unlock - wishful thinking probably.

anyway what exactly CAN I do with the phone without a working SIM?

I know the obvious ones, ie iPod, surf, email etc after jailbreak.
but what about the GPS? will it work without a SIM when I'm not on WiFi? Will it even work on WiFi?

All will work. Only call, sms and all phone functions are locked.