Still having this problem and can't find my old thread.
Stock rom, 2.3.4
1.45GB free space on SD card
Camera works just fine, only having problems with the camcorder. With the camcorder set at low (30m) and MMS (low, 30s), the camcorder will record video. With it set to High (30m) and YouTube (High, 10m), the camcorder will not record video.
I recently purchased a HTC Desire. I tried to use the camcorder today but could not. I re-formated the SD card and set my phone back to the factory settings but neither action worked. What happens is that when I open the camcorder app, it comes up but when I press the optical button nothing happens. I can still take pictures.