Can others be so kind as to verify if they are also having an issue with receiving voice calls or SMS while their phones are using the 2G network for data access. (3G and wifi either unavailable or turned off.)

We have this issue with Orange and I have tested it on one Sunrise iphone4 and we had the same issue. Which is not surprising since Orange and Sunrise are operated by the same staff. It does work correctly over Swisscom.

I raised this case with Orange over one month ago and they still have given me no concrete feedback as to why their network behaves like this.

(FYI this is a network issue and not related to any phone configuration).
Feel free to harass Orange about this. It might get them to pull their fingers out a bit. When I raised the case it took me about 10 calls to their support plus 2 visits to Orange shops to finally get a technician who was capable of understanding this simple but critical issue.

EXACT STEPS LEADING TO PROBLEM:
1. Force phone to use GSM (2G) mode only or be in an area with no 3G coverage, or if your phone chooses to use the 2G network
2. Disable switching to wifi:
3. Connect to 2G packet data, download email or download webpages: Status Bar-> spinning wheel
4. While packet data is connecting, using another phone place a call to your phone
5. After packet data has connected, using another phone place a call to your Phone

EXPECTED OUTCOME:
You expect the packet data connection to either DROP or be SUSPENDED (depending
on network capabilities) and for the phone to ring indicating an incoming call or SMS.

ACTUAL OUTCOME:
The packet data connection persists and remains active; the phone does not ring
and the call is handled by the network as if the phone was unreachable (for most
users this means forwarding to voicemail).

REPRODUCIBILITY:
always; no exceptions.
This has been tested extensively on the Orange network by me and many other users.

Tested devices which all show the same issue, iPhone4, iPhone3GS, Iphone 3G, several Android models.

Very interesting - I just tried this (syncing Gmail account in Mail app on 2G and calling iPhone from the landline at the sametime) and got exactly the same result - straight to voicemail, packet data still downloading.

Killed Mail app from the app switcher, called again (still on 2G but nothing downloading) and the call went through.

This is an iPhone 4 on Orange. Never noticed this before.

Txs Ed for testing.
I first noticed it when we were in the mountains where there was no 3G coverage and my wife was stuck at a local bus station for 3 hours unable to call me because I was using my iphone for data access for work. Eventually she sent me "whats up" message and of course I was able to call her straight back.

For anyone who requires their phone so that they can always be contacted this is a really series issue. One which Orange are still taking as a bit of a joke.

I advise you to do a search online, and see that this is a well known limitation of the 2.5G (GPRS over GSM) spec.
3G supports both voice and data at the same time. However, if a 3G phone has to switch back to 2.5G mode, it will face the above limitation again.

Yes the limitation of a non-3G connection is that it can't support simultaneous voice and data. (It's a limitation of the chip design in the phone It only has one receiver and that will never change.). This is the same as CDMA in the USA. If the phone starts a calls when there is an active data connection then the phone can decide to bump the data connection and let the voice call through. But if the call is incoming then the network must decide to bump the data connection. With both Orange and Sunrise in CH this is not happening. And given the rubbish state of both carriers 3G networks, this amounts to huge amount of missed calls when you phone drops to the 2G network....