the 1.1.4 firmware locks the iPhone to all SIMs including O2 unless it is an iPhone contract SIM.
What that means is that your normal contract O2 and PAYG O2 SIMs will NOT work unless the phone is unlocked!
This was not the case until 1.1.3 it seems.
There are two choices for unlocking your 1.1.4 iPhone.
ZiPhone and iPlus.
iPlus installs several important packages with installer that you will need.
ZiPhone ONLY installs Installer.
But the main difference is one of what happens if your iPhone breaks.
iPlus lets you reverse everything you did to your iPhone and ZiPhone does not.
So if you were to drop your iPhone then Apple would not repair it as ZiPhone makes permanent changes that are not reversible!
Having said that if you are not signing up for an official iPhone contract then Apple won't touch your iPhone either way - they only fix/swap iPhones signed up officially on O2.
ZiPhone has also been know to break wi-fi on phones from time to time.
The safest and more efficient software to use is iPlus.
You can download it here:
http://www.hackint0sh.org/forum/showthread.php?t=34049
There is a tutorial here with photos and a video of the process:
http://www.hackthatphone.com/114/iphone_114_true_unlock_windows.html
I used iPlus on my UK 16GB iPhone and it worked perfectly.
Just download the standard version - you do not need the international payload!
Have fun!