Its not terribly common, but there have been some cases where upon installing froyo and updating the camera, the firmware flash has messed up and broken the camera. Make no mistake, this is not a software issue. Its a camera firmware issue and the only way to fix it is to reflash the firmware.
Now, the camera software offers once. After that, if it fails, it isn't going to prompt again.
To get around this:
1. Download Launcher Pro from the market. Any cut and ADW will likely work too.
2. make a new shortcut, to an activity.
3. Scroll to Camera Firmware, and choose the second option (user)
4. Click ok. There is now a shortcut on your homescreen. Choose the third option, Phone to CAM FW Write. Put your phone down and do not touch it until it is done.
Hope this helps.
Now, the camera software offers once. After that, if it fails, it isn't going to prompt again.
To get around this:
1. Download Launcher Pro from the market. Any cut and ADW will likely work too.
2. make a new shortcut, to an activity.
3. Scroll to Camera Firmware, and choose the second option (user)
4. Click ok. There is now a shortcut on your homescreen. Choose the third option, Phone to CAM FW Write. Put your phone down and do not touch it until it is done.
Hope this helps.