Your best bet is to just place an ad on Craigslist and in the paper in the lost and found sections. If someone tries to claim the phone, have them identify the picture on the lock screen.
I used to work at an Apple Store Genius Bar. We were not allowed to give out any information from our system ever. If you're located in the US and the phone has a SIM, it probably has AT&T as a carrier. They will not be able to give you any info on the phone either.
Just to provide some insight as far as why Apple can't help you contact the whoever might be listed in their system, remember that a computer or iPhone is a transferrable device. We would frequently have customers bring in a device for repair that was purchased secondhand and the original owner's information was still in our system.
Let's say Tommy buys a MacBook Pro and registers it. Later, Tommy sells his MacBook Pro to Kate because he's broke. Kate purchases the MacBook Pro but does not update the registration. A month later, she leaves the computer in an airport and you find it. You take it to the Apple store and they say, "Oh, here is all of Tommy's info. We'll just call up Tommy and he can come get his MacBook back."
Tommy is not a very scrupulous person, and he fails to mention that he sold the MacBook Pro a month ago. He comes and picks it up and now he has Kate's money and his old computer back. Sweet deal, right? So you can see why this isn't something that Apple would be willing to do.
The Apple employee you talked to was not trying to be obstructive when he wouldn't help you out, but there's a lot of liability things at stake here. They were pretty committed to the idea of protecting customer data, sometimes to the point of idiocy when I worked there, so they're pretty much a dead end as far as returning the phone.
Apple works very hard to conserve battery life, and determining location, no matter if it is through GPS, cellular, or wifi connections takes extra battery. The arrow displays any time a 3rd party app requests your location. For instance, when you open Maps, the arrow will likely turn on because Maps needs to pinpoint where you are. The arrow may also turn on for system level locations services (settings can be adjusted in Settings > Location Services > System Services), and depending on your settings, the arrow may or may not appear for that.
As for Location Services being on or off, you can set that in the settings (Settings > Location Services), but if you see the arrow, it is likely on already.
The arrow only appears when location services are active, and may or may not show when it is just on.
Best Answer
There is no public API to control the Wifi on iOS. Therefore Apple won't allow it on the AppStore.
If such an app exists then maybe on Cydia.