First of all if the phone was not advertised as being unlocked and jailbroken then I seriously suggest you do not attempt to do it yourself. Unless I had experience doing this to my phone I would not sell it and agree to do this post sale. It sounds as though the buyer purchased the phone then had a list of demands that he/she wanted to be met.
+1; this is very relevant advice. As much as there are folks who really want nothing more than their cell phone (iPhone or other) to be unlocked, jailbroken and freed from the reigns of the evil telco... there are an equal amount of people who want their iPhone to be clean, "virgin" and they feel pretty uneasy about having a device that's been somehow hacked.
Again, it depends on your buyer. If they asked "if possible, can you unlock it for me" well then you may consider it (unless it was explicity advertised as being safely unlocked, etc... ) ...
Otherwise, ship it exactly as described.
The next thing you do is take time/date stamped photos from every angle possible on the phone, box included. Then pack it, take a photo of it packed, then another of the box being sealed. The reason for the paranoia is that you could very well ship off a mint phone and then find PayPal has removed funds from your account because the buyer is asserting that they received the phone damaged. While the photos may not help you, they certainly cannot hurt your case.
This is, again, very important - and not just for shipping a phone but indeed for any short of sale where the item may be considered easily damaged.
I once did this after selling a turntable (yes!) to a buyer on eBay. I packaged the whole thing ultracarefully, including stabilizing the various movable components (tonearm, platter, cover, etc) and then doing a multiple layer double pack with the requisited airpacks and non-static foam peanuts. I took pictures of the whole thing.
1 week after the item showed as having been accepted by the buyer... I get an email from him/her stating it was "in multiple pieces and lousily packed".... I replied back with the photos, stating how I had packed it and that if there was truly any significant damage that he would have to file a damage claim (as it was shipped insured) and provide the carrier with my original packing info.
Needless to say, I didn't hear back from the buyer...
Always helps to be proactive, and since a few digital pictures cost nothing but a few seconds of time - it's a no-brainer.

UI Guru