IPhone 2G - Stuck on Connect To iTunes/Slide for Emergency

I was going back to my original iphone 2g where I'm stuck on "Connect To iTunes/Slide for Emergency" screen.
This is not a jailbreak phone as it was working phone until I choose an upgrade and went back to orignal iphone. I was told at AT&T store I have to activate with iTunes. With latest version of iTunes, I get connection time out error[no error code] on connecting to iTunes store after activation is complete. I get an email from apple my phone is activated, but I still see Connect To iTunes... As soon as I plug-in the iPhone I get connection time out error.
Per AT&T everything provisioned as per my account and even they put the sim in a diff phone and it works. Thouhgt I could try with old version on iTunes and got atleast a stage I can see everything [Name, Capacity, Software Version and Serial Number] in ituens. This is with ituens version 9.1. But I still see Connect To iTunes... As I run diagnostics from itunes I see that orange for 'No iPhone or iPod found' under 'Ports'. Interstingly, if I take out the SIM, I can see everything [including my screenshot] and I can browse using Wi-Fi but no calls as there is no SIM. This is sixth day that I dont have working phone and still counting... 
Since I dont have a back up and not sure how best I can bring my phone back online without restore. Plz help.

This has been taken care by sr advisor at apple.
The problem seems to be an issue as the apple server does not know my iphone at all based on the serial number. They manually updated the s/n and sim on their servers and I dont see connect to itunes window anymore by connecting to iTunes and phone is back online without any restore.
Per my understanding I should get an email as it updates the content on the servers, but I never got one and ended up calling again after 48hrs. Then I was told you should be good, goahed and connect to iTunes, ofcourse I was also told if that does not work you have to try restoring.. scary!!
Now, I'm back on searching to upgrade my phone
Happy Thanksgiving.

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