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Yesterday, Apple released iPhone firmware update 1.1.1. The good news is the upgrade is supposed to fix security holes and add new features. The bad: it also, as promised by Apple on Monday, appears to have turned many hacked iPhones into expensive paper weights. And, unfortunately, some with unaltered iPhones have run into trouble as well.

Reports have been coming in from owners of unlocked iPhones—those that have been modified for use with another network provider, say T-Mobile, besides AT&T—no longer work at all or correctly following the installation of the update.

The update apparently returns unlocked iPhones to the activation screen. From there, however, it is not possible to activate your iPhone again, unless - in some rare cases - you have your original AT&T SIM card and a service agreement with that carrier; both of which aren't likely for those who've decided to use their iPhone with another operator or are one of thousands of international iPhone users.

In another blow that likely affects a greater number of iPhone users, what Apple calls 'unofficial' third-party applications—those that don't run within the safe confines of the Safari browser—no longer work after the upgrade. And, in some instances, the iPhones themselves are no longer functional.

Apple has yet to release a software developer kit to allow developers to create applications that run natively on the iPhone. Hackers have used what's often referred to as jailbreaks to give software developers direct access to the full power of the iPhone, which, if you haven't noticed, is one powerful little computer.

This has given developers far more leeway in creating powerful and useful applications than the confines of Safari allows. It is also something users of Windows Mobile, Palm OS, Symbian (S60 and UIQ) and Linux devices have long come to expect as part of their smartphone experience.

Apple has cited security and reliability issues when defending the decision to give developers access to the iPhone's core. You'd think they'd be able to do so without the integrity of the iPhone being compromised; maybe by giving developers access to all but the most essential functions. It would certainly be a blow to the hacker community that they seem to despise and would endear iPhone users, many of whom aren’t feeling much love right now, more to the company than disabling their applications.

Even worse than the disabling of third-party applications and re-locking or bricking of unlocked iPhones are reports that the new firmware is apparently wreaking havoc on the iPhones of some folks who didn’t hack their devices in any way whatsoever. At least these iPhone owners have their warranty to fall back on, something Apple says isn't true for most of those who've unlocked or hacked their iPhones.

Keep in mind, once you've upgraded to firmware update 1.1.1 you can't go back to 1.0.2 again. So if you’ve got an unlocked iPhone and are happy with your service as is, we suggest you wait until a workaround around the software upgrade has been developed before installing it.

Just read this bit of good news on The Unofficial Apple Weblog. Although Apple has posted warranty warnings about unlocked and modified iPhones in its stores, some Geniuses at Apple Genius Bars across the country are taking paper-weighted iPhones to the back of the store and coming out with fully functional units.

As the article points out, it isn't clear whether these are unlocked iPhones in the first place or just disabled because of third-party apps being on the handset during the update, and whether or not the iPhones that come back to the customers are the ones they handed to the Geniuses in the first place or are replacements.

The Good News About Firmware Update 1.1.1
As promised, firmware update 1.1.1 brings iPhone owners the same access to the iTunes Wi-Fi Music Store that iPod Touch users enjoy. With it, you can search and buy songs just as if you were on iTunes on the desktop. Songs bought and downloaded to the iPhone are automatically synced back to your PC and Mac.


iTunes Wi-Fi Music Store on iPhone

Another iPod Touch feature brought to the iPhone is the Home Button double-click shortcut to phone favorites and music controls. If you’re playing a song and are in the mail application for example, hit the home button twice to bring up iPod controls while still in Mail.

One update I've been eager to see that's finally arrived is an increase to the speakerphone and receiver volume. I can tell you that our iPhone’s speakerphone hasn’t been nearly loud enough. The Treo 750 we use blows it away, for instance.

 
Double Click Home Button for Favorites or Music Controls

After installing the update you can also adjust the volume of alerts.

Additional new features include the ability to view mail attachments in portrait and landscape mode and turn off EDGE/GPRS when roaming internationally, the addition of Bluetooth Headset battery status in the Status Bar, support for TV Out, and new passcode lock time intervals.

 
View Mail Attachments in Portrait or Landscape Mode

There's also the addition of a new space bar double-tap shortcut to intelligently insert a period and space. And you can now re-order stocks and cities in the iPhone’s Stocks and weather applications.

Security Enhancements
Apple's fixes seven Safari browser problems with the update, including bugs where URL contents and dialing information are unintentionally disclosed, as well as issues with cross-site scripting and JavaScript.

Another patch fixes a bug where an attacker within Bluetooth range may be able to cause an unexpected application termination or arbitrary code execution.

It also corrects two iPhone Mail bugs. The first may lead to information disclosure via a man-in-the-middle attack when checking e-mail over untrusted networks. The second blocks an attacker from dialing a phone number without confirmation when you click on a phone-number link in Mail.