Phone application locks up and unusable after 2.1 - how to fix?

After upgrading to 2.1, my phone application has become unusable 3 times. The previous 2 times I seemed to be able to get it unlocked by resetting a number of times but this last time I haven't been able to.
When I press the phone button, I get the dial screen but the green "Call" button doesn't have the text "Call" in it, none of the dial keys work and I can't select "Favorites", "Recents", "Contacts", or "Voicemail". Eventually the phone times out back to the Home screen. I have tried holding down the home key until the application terminates and tried the phone again but the same thing happens.
What to do? Is there a reason this might be happening that I can fix? Restore or should I be returning the phone to the Apple store for replacement?
Thanks for any help!

I haven't restored since updating to 2.1 I have backed up several times but by restore do you mean a reload of the firmware and the saved data or just a restore of the saved data?
Thanks,
John

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