I don't want to pay a small fortune to use iPhone in Italy

Use iPhone in Italy

I've got an iPhone 3G running 3.0 and soon will be going to Italy for a few weeks, which I do a couple times a year. Of course, I don't want to pay exhorbitant roaming rates. I'm considering Skype, but that's still a bit pricey for calling cell phones and for data transfer. Plus it requires wifi, which is much less available in Italy than it is here in the U.S.
So I'm considering 2 possible solutions, and I'd like to know what people think.
1) I'd like to find some sort of iPhone range extender that isn't cluncky and attaches easily to the iPhone (NOT the type that you attach to your router at home to emit a stronger signal) so that the iPhone itself will draw signals more powerfully and from a greater distance; I want my WiFi Finder app to survey a larger area and use it without mt having to walk all over the place to find and use an available wifi.
2) Can I easily and safely unlock (jailbreak? I'm not clear about the diff) my iPhone and temporarily replace my ATT SIM card with an Italian SIM card (for example, Vodafone) for 3G and data, and then change back to my ATT SIM card when I return to the U.S? (I've already owned an Italian cell phone and have been buying easy-to-install SIM cards for several years.)
This is a tall order, so I thank you in advance.

One of my friends uses Skype via wifi and just turns off cell radio. Skype minutes are pretty cheap.

You can jailbreak and unlock your phone, or you can just simply not take your phone and use phone cards. they give cheap rates.

Corato said:

One of my friends uses Skype via wifi and just turns off cell radio. Skype minutes are pretty cheap.

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I'd been thinking about Skype. The only possible problem is that wifi isn't as widely available in Italy as it is here in the U.S.

I've thought a lot about jailbreaking and unlocking. Which would be the safer and more reliable way – with software, or with one of the SIM card overlays?

I would highly recommend NOT jailbreaking or unlocking the phone. For a few reasons:

1) Voids any warranty you may have
2) If you screw up, it bricks your phone
3) Why mess with a good thing?

My recommendation to you is that take your iPhone, but leave it in Airplane Mode, or at the least, turn off Data Roaming. If you make or receive calls on your trip from your iPhone, it will be crazy expensive rates per minute. Using Data will be even more expensive.

Go to your local AT&T or T-Mobile store, and buy a Pay As You Go phone for $20. Tell them to activate it but don't buy any minutes. Now go to some place and unlock the phone for $20. There you go. $40 and you have an unlocked phone. When you arrive in Italy, buy an Italian SIM card and put some minutes on it and use that to call whenever you are in Italy.