No Service on iPhone 4S. Please read and offer help. Thanks.

Hello,
I seem to have gotten myself into a tricky situation. I use a Blackberry 9900 as my main phone and love it as I send hundreds of emails and hundreds of IMs, BBMs, Tweets etc everday. I've always envied the ease an iPhone offers in terms of speed, browsing on a larger screen and the far superior app store. Nevertheless I'm reluctant to fully trade in my Blackberry. I got a new job and have a lot of work contacts and my job involves photography, networking and promotion. I decided to find an iPhone 3G to use for this side of my life and so I could use Instagram. My friend told me her boyfriend had an iPhone 4S available as he now had the new Samsung 3 phone and I could get it for 'mates rates' I bought it for £250. I think it's a good price.
He told me it was locked to 3 and this wasn't a concern to me because it's a work phone I don't care which network I'm using. My Blackberry is on o2.
I purchased a micro sim from 3 for iPhone's and put it in to see it say 'No Service' I went into the 3 store and they told me I inserted it correctly and gave me te customer service number and let me use the in store phone to contact them. I gave them the phone information I received when I purchased it and they told me that the phone was blocked. I was so upset. I asked how can I unlock it as I'm now the owner and paid a fair amount of cash for it and they told me to contact the sellr and that he can call them for me and unblock it vert easily. I contacted him and he told me to try another sim and has since been no help.
He has assured me the phone is not faulty and that it was working for him. He gave me a print out of the warranty for he phone and it does not expire until Oct 16th 2012. Three insist when I called back that the phone isn't faulty but indeed blocked. I offered to give them his name and details to prove I knew the owner, but they will not accept this. I told him this is too much hassle and I would like my money back, he will not text me.
My friend, well she is saying that the phone worked just fine for them.
I don't know how to fix an iphone, I don't know if it's faulty or blocked. 3 wouldn't lie, but I didn't expect my friend would either.
Can I fix this on my own? I'm not usually impulsive and this is why :/
Is there anything I can download to unlock it on my own. It is essentially at this point an iTouch and if I wanted that I would have purchased that for less than I paid or this.
Any suggestions, advice on how to resolve this problem either with the phone or the people involved would be appreciated.

The previous carrier is the company Three. I bought the 3 sim and it didn't work so I went to my local Three shop and with the information I gave them they told me the phone was blocked. Is this the same as what you are saying?
I thought Three sim in Three iphone would work. I wish it were that simple

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