I have the same issue as yours. I really talked with apple support twice. The first day, I have no luck, the second level support told me to pretty much to get lost in a nice way if I am not willing to pay $275 for replacement. I have a 64GB Iphone 5. So I called again the next day and told them what is going on about my front face camera and really hoping to get some resolution. In fairness, the front camera is rarely used and working fine before S/W update 7.04. I told them if I can only revert back successfully to 7.02 I would gladly do it but it doesn't work that way. So after holding and talking with them for an hour I was able to get help and spoke with Jessica and Sarah Elizabeth. They both helped me a lot and understood where I was coming from considering that my house pretty much live around Apple products. Sarah was from customer service relation and she was very helpful. They did some sort of diagnostic via text message, I don't know what is that for but I cooperated since they are very helpful. They are sending me a replacement via express repair. I was advised that they will check the defective phone once it's received/returned and has to be proven that it's not waterdamaged or opened. Hopefully everything works, considering I got this phone as a take over contract from someone, either way it was working properly prior to update. If things doesn't go well, they will charge me around $275, which I hope not. Money is tight especially this Holiday season. I only had this phone recently and the warranty just expired in two months while the monthly plan is still running. It really depends who you talk with Apple Support. I know this is a software issue, and I don't believe about underlying problem prior to software update. If there was a problem to begin with, then your phone should have started acting incorrectly but the point is it didn't and was working flawlessly.
My advise is, talk to Apple Support sincerely and express our concern, you might get lucky. With what happened to me, I still trust their product, considering I owned so many iphones in the past 3 years, I have like 3 iphone4, 3 iphone5, iPad, nanos and ipods. Considering to buy a mac book but will definitely in the process of buying apple TV box. I'll keep you guys posted for the update regarding this experience.
As of now, the replacement part is on the way probably will receive it in several days due to holidays, in the mean time they put a hold of 700 in my VISA for security purpose which is understandable.
