If your sisters iphone need to be unlocked(not an official carrier sim) then your SOL 4 now for activating.
Unless the iphone has the old bootloader 5.08(made before sept 2008) then you can downgrade the baseband with fuzzyband. You have 5.09 then your sisters iPhone is an iTouch 4 now.
Now with your jailbreak issues:
If spirit is giving you a problem on 3.1.3, then dont use it.
Get your iphone's 3.1.2 fw and downgrade to it using any version of itunes. 9.03/9.1/9.1.1
You got to be in DFU mode(google search it if you dont know it) when you use the shift restore method<--important.
Any 1600 errors ireb will work for it.
Jailbreak with redsnow 0.9.2 <-- what i use and its never failed.
Dev-Team Releases RedSnow 0.9.2 | AllTechRelated