AT&T is selling the refurbished Iphone 3G 8GB version for just $49.99. While obviously these are not brand new, over 90% of consumers who have bought refurbished products from Apple have been satisfied with their purchase. On top of it, you still have an Apple warranty and for added protection, maybe buy an extended Apple Care product.
While AT&T requires you to get into a 2-yr contract, one way to avoid it is to jail-break the phone using various tools freely available on the web.
Search link – the first one looks good
Note that this is only my opinion; anything you actually do with the phone is at your own risk.
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