It looks like Apple didn’t plan the rollout of the iPhone 2.0 software quite as well as they could. People are getting errors from iTunes part way through the upgrade, leaving them with an un-activated iPhone that can only make emergency calls.
The error reads:
We could not complete your iTunes Store Request. An unknown error occurred (-9838). There was an error in the iTunes store, please try again later.
If it were my phone (and I’m so glad it is not), I would disconnect the phone, wait a bit, and then reconnect and see what happens when it tries to activate again. I’d keep doing that every 5-15 minutes until it succeeds.
This is just spooky — this article showed up in my Google Reader 20 seconds before it happened to me. I have since twice disconnected and reconnected, and still no luck. I’ll report back if I am successful.