Using 3GS as n iPod Touch

Hi everyone,
I just bought the iPhone4 and want to give my son my old 3GS to use as an iPod touch. I want him to be able to sync his songs and stuff from his iMac.
The 3GS still has my old SIM card since I couldn't use it for the iPhone4. If I take the SIM card out, he gets "No SIM card inserted" error - and thats annoying.
I reset the phone back to factory settings and when connecting to iTunes, it's asking me to set it up as a new phone or restore from backup (my phone number). Is there a way around this? I just want him to use it to download games from App store and listen to music.
Thanks for your help,

Follow the directions here:
http://support.apple.com/kb/HT3406

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