It seems like there’s some sort of service outages with the iTunes store related to users upgrading to the iPhone 2.0 firmware. The firmware download and upgrade process seems to have upgrade fine, but mine is stuck on the please-connect-to-itunes screen. All I can do right now is view the IMEI and ICCID, and make emergency calls.
Update: After 4 continuous hours of having it plugged in, it finally reactivated and synced. PITA, but the new apps are hot!!!