I don't have AT&T anymore but have an unactivated iPhone with a new sim card. Is there any way to use it like an iPod touch - without setting up an AT&T account. I don't have the old sim card; previous owner kept card.
Sadly (for you), Apple only activates the OS on phones that have a current valid wireless account. The official answer is to keep the valid SIM with the device and take the SIM off the account when selling/donatinge the phone.
If you can't get that original SIM, you still have options. You will need an active SIM card to get things activated. (And likely that phone is locked to AT&T - so it will likely need to be an AT&T SIM) If so, the easiest is buying a $6 SIM from AT&T and they have stores all over the place.
Once activated through iTunes, that SIM will work to activate that device in iTunes even if the account expires or that SIM card is no longer active.
You can also jailbreak and/or unlock the device, but that can be more work if you worry a newer OS might tempt you to re-do the jailbreak or unlock work.