Dom I Did this, went to Car phone Warehouse bought a phone with a Sim told them what I wanted, they unlocked the phone and I binned the sim card. (having used the £10 free Credit.)
Most phones (unlocked) i've owned - mostly Nokias - work fine with contract and PAYG sim cards from Vodaphone, Orange, O2, T Mobile. Actually, thinking about it, make that all phones I've had!
Just had a Sony Ericsson W800i unlocked from Vodafone. Only £2.50 to do it. As I am on O2 I then had the problem of getting the Wap and MMS working. Fortunately O2 will text you the settings and it is done automatically. For a little more you can have the phone de-branded so all the bits added by the network are removed eg Vodafone live.