http://www.o2.co.uk/iphone/o2tariffs...stingcustomers

As most predicted - you can simply buy the new 16GB iphone and use your exisiting sim with it - personally I won't be bothering as I am not really using the full 8GB TBH , but it is nice to know in case the 3G iphone stays on o2

But what I found interesting , was that o2 will happily supply a new sim for your iphone , which the new owner ( should you sell it ) can register and activate via itunes in the same way as you do when you buy it new - (OK so it would be better to unlock it - but hey ho ! )
But the point is , the handset can legitimately be sold and used with its feature-set intact , which is nice
But then I suppose something like this was necessary - otherwise once your contract is ended , you iphone would become a brick - it woud be nice to see OFCOM force o2's hand in this regard (WRT unlocking) but I doubt this will happen