Apple today released iPhone Software Version 1.1.1. Most significantly it adds the iTunes Wi-Fi Music Store, and is a full software upgrade, weighing in at 153 MB.
The update also enhances the ability to use the Home button to control music, patches security bugs in Safari and Bluetooth, adds TV Out (using the new iPod AV Cables). It also adds a battery status icon to the menu bar for the Apple Bluetooth Headset. In addition, some widgets have been improved (stocks and cities can be moved around in order). Apple has also offered an option to disable EDGE data services while roaming (to prevent international roaming charges).
However, as Apple cautions in the update prompt, modified iPhones can be damaged by this update. PhoneNews.com confirmed this with one of our own iPhone units, the iPhone (which was SIM Unlocked using the anySIM/iUnlock process), now reports an Incorrect SIM is present after update (even with an AT&T SIM). We strongly encourage you to ignore other media reports to the contrary and not update your iPhone if it has been unlocked.
Furthermore, iPhones that have been updated with 1.1.1 do not appear to be downgradeable to firmware 1.0.2. iTunes blocks that, giving error codes saying that the iPhone update failed.