According to sources close to iPhone Atlas, we could see a public leak of the iPhone 2.0 as early as this weekend. The update is currently officially available only to folks accepted into Apple’s $99 iPhone Developer program or who have been selected to beta test the release’s enterprise functionality.

Installation of the iPhone OS 1.2 beta generally requires a special signature from Apple, but an underground team has discovered a method for bypassing this signature and installing a modified edition of OS 1.2. This installation method requires the use of “Pwnage,” a tool that leverages an exploit found in the lower levels of the iPhone/iPod Touch bootloader. Exercising the exploit allows these devices to run unsigned code. With this capability in place, Pwnage can modify the iPhone OS 1.2 IPSW (installation file), pre-activating and pre-jailbreaking it.

Only iPhones that are already unlocked (not tethered to a sanctioned cellular network) can retain phone functionality after receiving the unauthorized. custom 1.2 update.

Keep in mind that if you go this route, you may need to continually upgrade to the latest build in order to keep the iPhone functional.