Extra iPhone 3G

You can sell it or give it to your son,
It will function essentially as an iPod Touch the limitations would be that it wouldnt be able to access asny of the 3G features for data or Phone, only Wi-Fi
Does it still have the Sim card in it or was that swapped to the new iPhone?
If it doesnt have the sim in it anymore you can have issues when you try to update and the like, best bet in this regard is to get a replacement sim for the new iPhone and put the old one back into the original. While you still wont be able to access the carriers network you at least wont have to worry about the device locking up when uppdating or anything like that.
NOTE:
You can probably expect it to be a bit buggy though as chances are it still probably does have damage internally
Message was edited by: r.cloud
Sony Vaio Windows Vista 2xiPhone 3G, iPod Touch 2G, MobileMe

More than likely you purchased the first iPhone 3G at AT&Ts subsidized or discounted price, which is $199 for the 8GB, and $299 for the 16GB. If so, you dont qualify for AT&Ts upgrade or subsidized pricing on any phone including the iPhone 3G until you fulfill the contract term for the subsidy you received from AT&T for the iPhone that was water damaged. AT&Ts non-subsidized price for the iPhone 3G is $399 for the 8GB, and $499 for the 16GB, which still requires a new two year contract. AT&Ts no-contract price for the iPhone 3G is $599 for the 8GB, and $699 for the 16GB - with no contact required.
Apple will not buy either iPhone back from you. You can sell the first iPhone 3G on eBay, or let your son use it as an iPod Touch. As long as the no longer activated SIM card remains in the iPhone - the SIM card that was used with this iPhone when the iPhone was activated with AT&T, you can install firmware updates on the iPhone and restore the iPhone with iTunes if needed or wanted. If the no longer activated SIM card is not available or inserted in the iPhone, you wont be able to install a firmware update or restore the iPhone with iTunes if needed or wanted. This wont prevent accessing the internet via wi-fi, syncing the iPhone with iTunes, and using 3rd party apps.
 PowerBook G4 17-inch/1.67GHz/2GB RAM Mac OS X (10.5.6) 7200rpm-100GB HD,  iPod w/Video 30GB,  iPhone 3G 16GB