Have been using iPhone 5 without sim for 6 months, restore, and now I can't complete restore, this error:

"There is no sim card in the iPhone you are attempting to activate.
Please disconnect and insert a SIM card in the iPhone."
There is a lock symbol above right, but, can’t do anything with that.
I am not trying to activate the phone, just doing a restore . The phone was unlocked by AT&T 6 months ago, after contract was up.
This is strange, I’ve been using this iPhone (5) for 6 months without a SIM, first time I’ve tried to do a restore, and it won’t let me, thinks I want to activate it? I just want to continue to use it as an iPod touch. What do I do? I have the old sim card, but, I don’t want to put it in and attempt to activate it, it is an AT&T sim and I left them behind 6 months ago. I could try the T-Mobile SIM in my iPhone 6, unless it is again smaller than the iPhone 5 sim?
I should be able to restore this phone without the sim and continue to use it as an iPod touch, why is this a hassle??? I'm a long time Apple user, prefer their products, but, sometimes Apple is extremely frustrating! Aarg!
Anyone know what to do?

ok, I did, and it said again congrats your iPhone is unlocked, but, when it said there was a new carrier update, I cancelled it, but, it asked me again, I cancelled again, I guess I'm scared it will lock it again if I allow the carrier update.
Oh, there it goes again, this time on the phone, arg. I hit update, I hope it doesn't freak out.
I'm glad I didn't destroy the SIM like I almost did. But, it will come out again, longer battery life with the cell portion turned off.

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