Are you holding the reset button depressed for two power cycles, then releasing when the Red light blinks? That's the reset procedure for my DCS-5300G. Not sure if it's the same for your model. Tried reloading the latest firmware?
I actually found a real bug inside my camera! It was acting strangely (refused to email pix when an event occured), and I ended up taking it apart. I'm guessing the bug that fell out was stuck in the tiny cooling fan. The fan seems to have failed, but since my cam was way out of warranty, I simply drilled out a bunch of cooling holes, and enlarged the existing ones. It's been running fine for 6 months now!
WyreNut