My C5060, 16 months old, is acting similarly. The lens wont extend and the last picture i took shows in the viewer. The arror keys won't work and i can do nothing else with the camera. Their support centre won't offer any help. It has had light use and cared for carefully. No problems before this (about a week ago) but i couldn't be more disappointed and will never be buying Olympus again. They take a great picture, but if this is the result of a higher end camera after such short use, then it isn't much good.

Friends told me to get a Canon, that is what i will do next time.

PS (I was told to try leaving the batteries out of the camera for 10 days. It will potentially reset the camera - worth a try)