I need help with a iphone that has me locked out can anyone help?

i have an old i phone that my daughter uses as an ipod she put a passcode on it and cant remeber the password so now its locked and says insert sim card so i asked the lady at at&t about it she said connect it to my computer and restore system settings but when i connect it to my computer it says cannot locate this phone insert sim card any suggestions on how to unlock this phone?

Put the iPhone into recovery mode and restore. To do this please see the links below....
http://support.apple.com/kb/ht1212
http://support.apple.com/kb/HT1414

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