IPhone Stuck on Emergency Mode after Update

Need help on how to get my orginal iPhone 2G out of Emergency Mode only. Here's my issue and the solutions I've tried but so far none of it fixed my iPhone.
Problem:
I have an original iPhone (which I kept from 2007) and it has been working just fine as an iPod (no cell service anymore) since 2008 until I updated the firmware to 3.1.3 two days ago when I synced it with iTunes. After the firmware update, it remained stuck on Emergecy Call mode ony.  I know that the orginal iPhone can only be activated with iTunes, but iTunes doesnt seem to recognize it - not even an info about the device can be seen.  So, I tried to restore it through DFU mode, but even after re-installing the firmware, it remained stuck. I tried it both on my Sony VAIO with Win7 computer and iMac with Lion.
Solutions I tried:
1. Took my iPhone to Apple store - and they can't unlock it, they said their iTunes version doesn't support the device anymore.
2. Took it to AT&T - they can't unlock it either even after putting in a SIM card that's active from one of their phones.
I'm at a dead end on this somehow. Anyone who can give me a solution to this, I'd appreciate it a lot.
Just FYI, I'm using iTunes beta (10.5.1.25) on Win 7 and iMac  Lion and non beta iTunes on my Mac Air with the same result.
Will activating the iPhone back with service through AT&T solve this? This seems like it's the only way out? If I have to resort to that, I'll just have to cancel my service pretty much on the same day after activating it as soon as my phone unlocks. Somehow, I found it odd that Apple couldn't even unlock it. I don't remember reading anywhere that they will stop any kind of hardware support to their products.
Thanks everyone!!! Hope someone can help me with this.

It didn't activate after the update, so it is like a new phone. Reboot your computer, then follow the steps here:
http://docs.info.apple.com/article.html?artnum=305797

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