There’s an excellent how-to over in the MacRumors forums that details how an enterprising individual purchased a scratched up iPhone with a broken screen off of eBay and restored it to its former glory without sinking too much money into the project.
The process involves dry sanding, wet sanding, polishing, and replacing the cracked LCD screen with a shiny new one. You’ll need some time and patience but otherwise, it doesn’t look too complicated at all—especially given all the money you could potentially save.
[DIY] Restoring an Iphone ( Front and Back) [MacRumors Forums via HacknMod]