WP7 device without service?

[teamgood]

I am interested in getting into Windows Phone 7, but first I am curious what is functional on a WP7 phone without activating cell and data service for it. Does anyone know if everything is functional using wifi for things that require data? So essentially it'd be like an ipod touch - allowing full use of the device and access to marketplace. I would like to test out some apps I'm making and play around on it, but don't need another phone contract at this point in time. Thanks!