Just to let everyone know: I've just spent a couple of infuriating days battling with O2 and the Carphone Warehouse. Basically I bought a used iPhone 4 and wanted to swap my standard sim for a micro sim. I have since learned that neither the Carphone Warehouse or O2 are prepared to do this as they want you to buy new iPhone 4s from them on a proper tariff.
The answer? Make your own micro sim.
Just google "cut microsim" and you'll find instructions online and on YouTube. I just cut my standard sim down with scissors and it works perfectly. I didn't even do that good a job!
What have I got? An iPhone 4 for £400 on eBay on a £14 a month sim only contract. Free web, calls and text. Magic.
Ignore any warnings and do it yourself. It's really easy.