The iPhone Dev Team has found a way to rescue you're bricked iPhone, but don't rush to upgrade just yet.

The fix won't allow you to install or enable the 1.1.1 update on a SIM-unlocked iPhone, it will merely allow you back up to 1.0.2.

If you have an iPhone which has been sent into activation limbo by the update, however, this is welcome news. The job remains far from done, however, and some phones will still be seriously impaired.

03 Oct 2007

The Wiki page mentions that the team continues to have issues with the baseband firmware, which is used to control pretty much all of the iPhone's mobile phone functions. Because of this, users of unlock tools that edit the baseband firmware, such as the "free SIM unlock" are still unable to regain phone, EDGE,and SMS capabilities, though the WiFi and iPod features will work.

Because of bandwidth issues, the group has asked not to be linked directly. You can view the instructions, however, by going to the main page and searching for "downgrade from 1.1.1 to 1.0.2".