Did iphone update just delete everything?

I've been using an iPhone 3gs as a ipod/media wifi device for quite some time now and to avoid accidentally using the defunct sim card in any way, discarded it.
I recently plugged the iPhone into my mac and was prompted by itunes to update my firmware, which I did, I did not choose to restore, regardless it said it was "backing up" my device or at least it took long enough to do so.
After updating I was met by an activation screen requiring me to have an AT&T sim card (it's long gone) while I figure I'll have to hunt down another sim I'm more worried that itunes wiped my device and didn't really back anything up.
I searched for the location that supposedly has the backup data and found a folder that is definitely too tiny to be any of the data that was present on the device.
(maybe I'm looking in the wrong place?)
I also went under preferences and check the last device backup, it appears to be one from months ago.
I checked the iphone with funbox only to find that it has all the default directories and nothing else, it looks like it cleared it.
I definitely did not choose restore nor would I expect itunes to try to offer that by default.
I don't think I want to bother re-enabling the device if I lost all my files, do you think it will offer a restore if I go through the trouble of getting a sim?