Okay... in reply to my own response.
After doing a bit of digging, it seems there is a bug with the iPhone 3GS and storing "large" images in the library. After deleting my oversized panos from the library, my camera started working again. I was even able to email one of my smaller pano photos; even the resolution returned to the other images in my library.
Debacle Software apparently knows of the bug (as of Jul 4) and has been working on a fix/talking with Apple about the issue. Voice your concern and let Debacle know you want an update!
http://twitter.com/debaclesoftware
If you're in the same boat as me, but you don't want to delete the pano's you've created... connect to your computer, copy photos & REMOVE them from the phone. Even if you don't have Pano installed, removing large sized photos from your phone should help.