iOS now has the option to deactivate 3G roaming while leaving all the other radios on. This is much better than airplane mode -- you can get incoming calls and SMS on your regular number, and also use the GPS (assuming you have a pre-loaded map or wifi access).
I have tried messing with prepaid SIMs before, but now I find it easier to deactivate 3G roaming and survive on wi-fi. My wife and I traveled around Europe this spring and to Saipan this summer, and we were often able to get wi-fi in our hotel, in cafes/restaurants, or just walking down the street past someone's apartment.
If you have some sort of VOIP software on your phone (e.g. Skype), you can call people back using cheaper VOIP at a wi-fi spot. You will pay through the nose to talk to people using your regular SIM, but it is still free to receive a call without actually answering it. Just note the number, find wi-fi and call or email back.