Using my old iPhone as a de facto ipod touch?

i have a 1st generation iPhone and i just upgraded to a new iphone 3gs. i don't need 2 active cell phones (or the large phone bill) so i just have the 3gs active, but would like to use the original iphone as an ipod touch.
i have restored the original iphone to its factory settings (after installing iphone 3.0 os) and removed and replaced the sim card. i also tried to set up the original iphone on a friend's machine (i was going to let him use it).
at this point, the wifi doesn't work and itunes doesn't recognize the specific device.
is there anyway to now get this original iphone up and running with wifi capabilities and the ability to connect to itunes and the app store?
please help.

Using an original iPhone without a wireless service plan: http://support.apple.com/kb/HT3406

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