First, I suggest that you do not try using any type of liquid to start out with in the lens area. Get a can of compressed air with a fine tip and blow out the space between the cover and the lens barrel. Any residue hampering movement (possibly even a single grain of sand) could be keeping it from opening and closing correctly.
You can also take a look at the link below for some generic suggestions to dealing with this problem.
As far as the lens error is concerned, since you indicated that the camera does operate normally in picture taking mode, the only safe thing to try is to spray around the lens barrel with compressed air. If unsuccessful, there a number of more invasive procedures to try.
In addition, there is a new one available at the link below.
I would pick this one up and get the Square Trade warranty just for safety.
Please keep in mind that my diagnosis & solutions provided are directly dependent on the accuracy of your description of the problem. As with any "do it yourself" fixes, success is a "team effort", since I can't see or touch the camera, and relies on the customer's manual dexterity and ability to follow the instructions well.
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