I had both phones (my old and my new) on when I activated the iPhone and as soon as the iPhone became active the old phone said invalid SIM, or insert SIM, I can't remember. Bottom line, the SIM gets deactivated.
Yeah keep it as a backup. I keep my old one (Cingular 2125) fully charged in my glove compartment with a paper clip stuck under its skin to pop out my sim in case I need GPS (bluetooth... still mounted in back, waiting for that fateful update...)
I suck at directions, even hi-rez ones on 3.5" screens.
Also nice for a quick game of Mike Tyson's punch out or a couple gigs of music playback... don't even need a sim card for those. Say what you will about WM smartphones, they can do a LOT of things unactivated.