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Can i use a stock g1 as a wifi only device?

It might be possible, but definitely a bit tricky. Look around for some tutorials on some of the custom ROM sites (like cyanogen). Note that I don't think you'll need to run a custom ROM, it's just that those sites host the instructions you miht need. I think you'll at least have to root the phone to enable the WiFi network panel using a command-line connection. Once that's connected you can activate over Wifi -- not sure if you can do this without a SIM though.

I just bought a brand new G1 off ebay as well and without a T-Mobile SIM and a data plan it is not trivial to activate the phone. I bought an unlock code off ebay for $10 and popped in my AT&T SIM and activated over 2G. Then I disabled data and I just use WiFi and Voice. Love it. I bet you could do the same and use something like a GoPhone SIM (prepaid) to activate.

Or borrow a friend's iPhone SIM for a few minutes just to activate.

Good luck and have fun.
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