SO i got a new Iphone with 4.0.2 on it. My friend has an Iphone 4 with 4.0. Is swapping phones and sims a possibility? Do we need to reactivate the phones or once the sim is in we are set? What happens to our apps/contacts?

yes its possible..no you don't need to reactivate just sync with itune and it will replace all his stuff with yours