Last week's release of iPhone software 3.1.2 was intended to fix various bugs notably "sleep coma." Also available is the latest AT&T Carrier Update 5.6 which provides functionality on AT&T's mobile network (such as MMS). After a modest sync (for backup) I told iTunes to update my iPhone 3G.
What a mistake that was.
Doing the DFU Disco
My iPhone had been running firmware 3.1.0 without a hitch and MMS worked great.
With the installation of 3.1.2 and the carrier update my phone was rendered useless. The reception meter cycled through "full bars 3G" to "one bar no data" to "no service" then back to "full bars 3G." As part of the update iTunes restored my latest backup, which as before, was incomplete necessitating re-installation of some apps via the iTunes App Store.
After some research I chose to perform a clean install of 3.1.2 using the DFU Recovery mode. After another incomplete iTunes restore it wasn't long before the "full/low/no bars" problem presented itself again.
I had to get the iPhone working properly and took another go at DFU with the intent to downgrade from 3.1.2 to 3.1.0. Apple doesn't allow you to select older iPhone firmware within iTunes so I had to download and install it manually. The restore finished (incompletely again) and I expected to have a phone that could make calls.
Wrong. The "full/low/no bars" problem was still there.
AT&T Carrier Settings
What's consistent here? Installing AT&T Carrier Update 5.6.
I decided to have one more go at it and performed a clean install of 3.1.2 and told iTunes not to install the latest carrier update. After another eternity waiting for the (incomplete) restore to finish I watched the reception meter: full bars and 3G.
Expecting this to be short-lived I hopped in the car for my commute and make some calls. Four calls and one hour later: the reception was solid.
Right now, in a signal-devoid building, the iPhone is clutching desperately to "two bars and EDGE."
iTunes Restore Bug?
During my update from 3.0 to 3.1 there was an issue with iTunes not restoring all of my iPhone apps. This continues to be a problem for me but – interestingly – the Restore performed during the DFU Recovery was more complete than the typical Restore feature in iTunes.
Conclusion
Don't install Carrier Update 5.6 at this time or do so with caution.
Unfortunately there appears no way to remove a carrier update via iTunes; you must use DFU Recovery or be jailbroken. This reminds of the precarious – and unhealthy – co-dependency between a device manufacturer and the mobile carrier.
Apple prides themselves on delivering the best user experience possible and it must infuriate Mr. Jobs that AT&T is the continued point of failure in that goal.
At this moment my iPhone 3G is successfully running firmware version 3.1.2 (7D11) and carrier settings "AT&T 5.5" which is included in the 3.1.2 package.