After upgrading to a newer iPhone, how does keeping the old one around for development purposes work?

I have an iPhone 3G and I may be upgrading to an iPhone 4 tonight. I'm on AT&T. Once I get up and running on iPhone development, I'm thinking I want to keep the old phone around to test how apps run on the older, slower phone.

After moving to the new phone exactly how does the process with the old phone work? As in, is it now just a phone without a SIM card (so, an iPod Touch essentially)? Do I have to jailbreak it to keep it active? Is there anything else to look out for?

This might be a "duh" question so go ahead and close it if it is.

When I upgraded from 3 to 4, after I setup the iPhone 4 to sync with my computer, I took the iPhone 3 and used the reset-erase function on the iPhone and then when I connected it to my iTunes, I gave it a new name (so I could setup different sync options). I use it as an extra ipod-like device for the kids to play with or watch movies on when we are traveling.

Note: the iPhone 4 has a different sized SIM card than the iPhone 3 so you won't be just swapping them. I had to go to the AT&T store to affect the move from my iPhone 3 to iPhone 4. The iPhone 3 just has an inactive SIM card in it.

I didn't have to Jailbreak it to keep using it. And you can still use it with XCode Organizer to install applications that you are developing for testing purposes.

If you just remove or deactivate the SIM card, and don't upgrade or restore the OS, an iPhone 3G will function normally and act like an iPod Touch (or iPhone 3G with no cellular connection).

Both my 3G and 3GS are being used for iOS development (sans cellular) this way.

If you do upgrade or restore the OS, you may need a SIM card to reauthorize the iPhone, but the old deactivated SIM card (don't throw it away) seems to still work for this purpose.