IPhone 2G activation - need advice

Hello
Last week I got a new iPhone 3G on O2-UK.
What I am trying to do now is to legitimately activate my previous 2G phone with a pay & go card, in order to give it as a gift to my sister. The thing is that when I try to activate it through iTunes, I get an error message saying this phone cannot be activated.
<Edited by Moderator>
Does anyone know what my options are at this point?
Many thanks and happy New Year to everyone.

Yes, O2 do offer a Pay & Go option and so do most European carriers, hence my question. Since my SIM card was transferred to the new iPhone 3G, what am I supposed to do with the 2G one?
Ideally, I'd like to activate it in order to be used in a different country with the LEGIT mobile carrier there (namely Vodafone Greece).
PS: My original post was moderated - I didn't realise I used "prohibited" words, albeit in a perfectly legal context...

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