Before grinding your iPhone, my first suggestion would be to update to ios 4.1.  I believe included with this update was a new carrier profile (AT&T 7.0 to 8.0), but don't quote me on that.  I've had the M-Cell since June and our two iPhones (3GS model) connect as long as you toggle the phone in and out of airplane mode.  Sometimes the phone will pick it up, but it's a rare occurance.  My fiance's work BlackBerry is a different story.  It connected a few times after installing the M-Cell, but won't connect at all any longer. 

Everyone seems to be quick to throw the blame on Apple (and maybe they are partially at fault), but this isn't their device, it's AT&T's device.  They should be fixing this, not Apple.