If you are like me who hesistate to install the iOS 4, it would be good that you stay put for the time being. Many are facing strange issues with the update from 3.1.3 to 4.0. Be it Jailbroken or plain vanilla phones are facing similar issues with the 4.0 upgrade.
Most users will face the problem of losing 3G connectivity and MMS functionality. We experience the same problem ourselves and have been searching for a solution to it. Calls to telco redirected us to Apple Care Centre. The person suggest to do a fresh installation, that is, update it to 4.0 and after the phone reboots, set up the phone as NEW instead of selecting a backup file to recover your SMS, contacts etc.
This worked but it is cumbersome as tons of SMS will be gone. It would also mean that all your images and videos will be gone from your iphone unless you resync them using itunes (provided you copy them out from the 100APPLE directory using USB).
It is weird that restore from backup would actually DISABLE the MMS and 3G function of the phone. This is totally insane. There must be settings in the BACKUP files that triggers a shutdown of these two functions.
While Apple has yet to fix the issue with an update, a custom solution is already available to solve the 3G connectivity problem. The reason for no connectivity is because the APN settings is cleared out with the IOS4 update. Thus, if you are able to edit it to your local APN, it will work again.
Thanks to this software at http://www.unlockit.co.nz. Just enable WiFi on your iPhone 3GS and visit the site. Enter your respective operator’s APN username/password. It will be saved as a profile for your operator and your 3G will be back in action.
As for MMS, there is no solution yet unless you are JB it on certain models. We shall wait for an official update from Apple to fix this.