I have an unlocked 2G iPhone running 3.1.3, which proves it is doable. I personally didn't want to jailbreak/unlock my iPhone, but had little choice -- 2G iPhones are not supported in Canada, since they were never sold here.
I never tried any US sim card other than AT&T, but because the iPhone is unlocked it should in theory work with ANY standard sim-card-using GSM carrier, like T-Mobile or Verizon in the US. Up here of course we have many compatible carriers. I have a "Canadian" sim and my AT&T sim (I still use their service when I'm in the states, no complaints).
So it's doable. I used to consider it quite the PITA but now that I've gone as far as a 2G can go (3.1.3), I'm glad I did it. As for the "free" unofficial apps, largely that's very overrated -- there are a handful of nifty ones, but that's it -- a handful. Maybe a dozen. Tops. And the REALLY good ones are paid apps, just not available via iTunes. For me, it's pretty "meh." YMMV.