First of all the SIM is probably not dead. I'd bet money that if you
walked into a Telefonica office, and paid the money, they would
re-activate it. It is less expensive than handing out a new SIM, you
may however end up with a different telephone number.

It is locked because the phone was probably heavily subsidized when
you bought it. They hope you will use it enough on their network over
the next couple years to pay off the subsidy, but there is no
guarantee, at the same time they (and most other service providers)
have no desire to subsidize any other service provider, so it is
locked.

The only time was able to get a locked phone unlocked was a PacBell
Mobile GSM phone. I bought it on ebay supposedly as unlocked. I
pointed out to PBMS that if it remained locked, it simply meant that
when I was in PBMS service areas, I wouldn't be roaming at all, and
have an Australian GSM number to back up my claim. Roaming is
intensely profitable for carriers, so it only took them about an hour
to decide it was worth their while to unlock it. I presume they took
part of the time to find out if the Australian number I gave them was
valid, and if it was me......

For PBMS is was business decision, but that is a very different
situation than if I was a VoiceStream (now T-Mobile), or Omnipoint
users at the time. There was no guarantee (but a high probability),
the would derive significant revenue from the decision. By contrast as
as another USA GSM provider customer, they would have been subsidizing
the phone for someone else, with no prospect for significant revenue
from the decision.