IPhone :: Network Connection Not Resetting With Water Damaged Phone

So I'm having a few problems with my iPhone. About 30 hours ago, I dropped my phone into a full sink. It was immersed for probably one or two seconds. I made the mistake of trying to turn it on right away, and it started spazzing - i.e. the startup apple icon screen would come on repeatedly and for a while the screen was flickering.

I looked online and followed people's advice of turning it off, letting the battery die, and leaving it in a cool place to dry. Since this morning the phone has been in a bag of rice drying off. I tried plugging it in tonight (impatiently) and to my delight the phone revived itself after charging for about half an hour. I synced it with my iTunes and sent one or two texts with no problems. But almost immediately my signal went down to no bars and I lost 3G connection.

Since then, it was displaying "Searching..." at the top of the screen, and got bursts of connection enough to receive two texts. Literally I would turn my phone on and all the bars would be there, along with 3G, then within a few seconds no bars again. For the last while it's just said "No Service."

I tried resetting the network settings to no avail, took the sim card out and cleaned it lightly with an eraser, nothing. When I go to "Carrier" under settings, it "searches" for, then finds (after a few minutes), my wireless network, but as soon as I leave the page my connection disappears again.

My question is- does anyone know if water damage can cause this particular kind of problem? Even though my phone is working perfectly otherwise (besides a somewhat mottled, water-spotted screen), is it possible that something within the phone was damaged that will not allow me to get a connection? Or could it be the sim card that is damaged?