Unfortunately you will have to perform a factory reset of the device. As I mentioned, there was a chance it would not be a serious issue and that the fix woul be simple, but the fact that didnt work means the error is actually at a system level and the only reoslution will be to reset it, but its not as bad as it seems.
As long as you have a Google account synced to your device, your contacts, calendar, etc. will be re-synced to the device after you run the initial setup again as long as you sign in with the same Google/Gmail account. Any apps you have paid for, you can get back after you reset the device by opening the Market, pressing Menu on the phone and choosing "My Apps".
I recommend you go to http://google.com/contacts on your computer(with the same google account thats on the phone) then check all your contact groups to make sure the contacts are synced(if not, ask me about contact backup instructions).
As far as any data that is stored on the SD Card(images, music, etc.), it will not be erased. Only the phones internal memory is formatted.
To complete a Factory Reset follow these directions:
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I'm going to be very honest and blunt here. If that did not work, if you for sure did a factory reset (you would have had to setup the phone again when you turned it back on), and its still not working then your camera itself (the hardware) has become defective and your only option is calling your carrier and getting a replacement.
IU know thats not what you want to hear, but the truth none the less, so its what you deserve.