I have a motorolla mpx220 smartphone from cingular, and I have a $20 per month unlimited internet package. That package is more than twice the price now. They told me I could keep my package after upgrading my phone, but not if I get a smartphone or pda. My question is, if I buy a Cingular 8525 smartphone from eBay or something, and switch the sim card, does cingular know about that? What will they do to my data plan? Thanks.

Yes, your air time supplier will know you have changed phones as it idents itself on connection to their network.
If you proceed with this course of action you will be discovered and either have you contract revoked or have a massive bill appear on your door mat.