Thanks everyone. I have 2 questions:

1. Will resetting the iPhone bring it to its original state (Locked)? Then I must unlock and activate it again?

2. Will resetting the iPhone kill it in the same way as apple iPhone updates do? For eg. if we download apple updates on an unlocked iPhone, it disables the iPhone  permanently.

I'm a bit confused. I appreciate any suggestions. Thanks!!

Waaaa ... what's this?

@jasonlau
Reseting the phone is not the same as restoring the phone. Restoring is like formating your phone or what you call reflash firmware. Reseting the phone will bring the phone back to original setting not state i.e like u have not set it yet. It will not relock the phone. Jailbreak, activate and unlock still intact. So get your fact straight and don't confuse others.

@alpha_boy
I suggest you to restore the phone back. I think some setting/preferences got corrupted. Download the IPSW file from i.unlock.no and keep it for later use (if you haven't done it yet). Once you have the IPSW file (make sure its for iphone and not ipod touch or you'll be screwed), connect your phone to itunes and press SHIFT + RESTORE. A window will pop up asking for the IPSW file. Restore it and wait to finish. Then use iLiberty+ (www.ipluspwns.com) to do the jailbreak/activate. For unlocking ... i recommend using bootneuter. Remember one thing ... when itunes ask if u want to set the phone as new or the one you already backup .... choose to set up as new. Sometimes itunes will backup the corrupted setting and if you restore from that backup ... you'll end up with the same thing.

Phew that was long. If anything else not clear then you know where to find help.