I'm afraid that if you were directly connecting the RXD of the TC35i to the Arduino board, it might be damaged by now.
I am in the same situation, I might have killed the modem.
however, i was following this website, which says it worked to him...http://denhart.dk/2012/01/siemens-tc35-gsm-module-arduino/
there are pictures showing the direct connections.
y am getting the ÿ on each gsmSerial.read()
although its the same as if I disconnect the wires, so thats not saying anything good.
the led on the modem is flashing but i cant get anything usefull on the serial monitor.
any test to check if modem is burned?
its interesting to see that the led does blink constantly.
I would be more optimistic: since it doesn't work, you didn't use it long enough to fry it. The post you link shows that this modem is tolerant of 5V, and this is confirmed by the experience of another member here. See this post http://arduino.cc/forum/index.php/topic,154156.0.html
: the solution is a simple voltage divider.
As for the strange characters they often indicate a mismatch in baud rates. The fact you still get them when the modem is disconnected may indicate a buffered input, or maybe noise on the Arduino RX (may not be isolated, check also the back of the board). It may also be a code issue (are you reading the modem using HardwareSerial or SoftwareSerial, and on which Arduino model?). If you suspect a code issue I would advise to create a new thread with your code in it.
Anyway I would start from setting up the voltage divider before doing further tests.