i have exactly the same fault :
At 1330 today I have activated my giffgaff sim and bought £10 goodybag + £5 credit - this shows up in my account fine. The iphone keeps showing 'No Service' - I cannot make/receive voice calls / send text, never mind use internet (except thru Wifi).
I have programmed the data settings correect data settings for giffgaff, but this shouldn't affect the voice calls??.
This fault persists even after syncing to iTunes / doing a soft & hard reset / toggle airplane mode / turn off 3G / firmware restore.
I have tried the giffgaff sim in my old Ericsson phone and reception is 3-4 bars as normal. O2 status for this postcode is expected at 3 bars, and no recent network faults reported.
I am trying to use it in a iphone 3gs 16gb - formerly on O2, but now unlocked ... but SHOULD work anyway if still locked to O2?
Your probably having the exact same problem thats happened to me! I activated my sim back in June and it works fine in my Blackberry, I bought a 2nd hand Iphone 3GS off someone and the sim didnt work. at all... i tried syncing it, restoring the software, rebooting etc... Then I was told it needed unblocking, so paid £20 to get it unblocked.
Got the phone back and it recognised my giffgaff sim as 'O2-UK 3G' and allowed me to use the internet - download apps etc, but had no signal to make calls or texts and just said 'call failed'!
After hours of researching on the internet i got to down to the problem!... The phone had been barred/blacklisted! the person i'd bought it off had the iphone on contract and then reported it lost/stolen so he could claim a new one after i'd bought it which resulted in the phone being barred! hence no signal... effectivly it was just an ipod touch!
I rang O2 and gave them the IMEI number and they confirmed the phone had been barred to Orange...
So I have now had to pay a very clever man on my local market another £30 to get the iphone un-barred! he's had to send it off and i am due to colect it on Thursday so shall keep you posted if it works or not - he did advise me that as it was blacklisted by Orange then i'd only be able to use it on Orange! so i'll have to change network and try and transfer my number over.
If i was you, call O2 as Giffgaff dont have a number (stupid i know!) and give them your IMEI number and they will be able to tell you if the iphone is barred and to what network as well.
Hope this helps.