IPhone photos turned gray with "jpg" written on them!

Hi ~
I have found this issue on several forums but none ever were resolved...  All the photos that were taken on the phone (hundreds!) have all turned gray and have "jpg" on them!  When I try to open them, they won't open but sometimes flash a quick shot of that the photo is.
Other photos that aren't grayed out, when I click on them, they blank as well!  AND, the weird thing is that the newest photos from this week show up just fine.......
I have tried syncing, tried manually copy and pasting the photos out of the phone into a folder onto the PC and there is an error popup, "Error copying.  The parameter is incorrect."  On the phone itself when I try to access the grayed out photos, it says "The requested URL was not found on this server."
I am so sad that all of our photos are gone!  Any help would be appreciated!  Thanks!

As a Test:
Hold down the option (or alt) key and launch iPhoto. From the resulting menu select 'Create Library'
Import a few pics into this new, blank library. Is the Problem repeated there?
Post back with the result.

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