Well, this is what I ended up doing ...
1. I followed the ZiPhone troubleshooting guide for restoring ...
2. Exited iTunes, connected phone, and ran ZiPhone -D
3. When it said 'Done!' I ran iTunes ... it recognised I was in recovery mode and said I needed to 'Restore and Update' ... So I did.
4. It downloaded, unpacked, installed, verified ... and then ... said 'Error 1601: Unable to restore.'
5. My heart sank

6. I wondered what I was going to tell my wife as she had brought me this now brick as a present.
7. I looked at the iphone screen it was just bright white. Don't panic!
So, I re-read the ZiPhone troubleshooting guide and found the hardware recovery mode. The hold buttons down method. This looked promising ... this does a restore (apparently) to the original version and not an update.
So I watched and waited ... 5 hours later, well, that's what it felt like; in reality it was about 5 minutes later, my phone burst back into life and iTunes told me that my iPhone had been restored to its factory settings. Phew!!!
So now I had a locked, unactivated iPhone again ... well in for a penny in for a pound ... so I started the jailbreaking/unlocking/activating again using ZiPhone 2.4
And ... 4minutes later ... to my amazement, not only is my iPhone alive and working again ... it's now 1.1.3!!
YouTube working ... check. Google maps with it working out whee I am working ... check. Wifi, phone, syncing ... check check check ...
Quite amazing. I don't know if what I did was the right way, but it seems to have had the desired effect!?!?
Now I just need for them to bring out 1.1.4 tomorrow and I'm in trouble again.
ZiPhone does seem to be amazing!
Should I be worried about the bootloader being on 3.9? I'm not 100% sure it is, but I saw it flash past when I was watching ZiPhone do it's stuff ... it said BootLoader: 3.9_M3S2 ... what is the disadvantage of it not being on 4.6?
Thanks