if you jailbreak your iphone with "redsn0w" you can download a package (app) called cycorder. that is a video recorder. it isnt great, but it does work.
first make a backup on itunes if something goes horribly wrong, but i can garuntee that if you do it right, it will work fine
what you do is google "redsn0w" (thats with a zero)
run the setup or whatever it has
follow the instructions exactly!
then when its all done and the iphone has rebooted and is ready to use again, go to cydia, install the complete upgrade it will have for you. then go to search, and look up "cycorder"
in the upper right hand corner there will be a download option, then it will say confirm. confirm the download, and it will have a black screen with white codes going across it. when that is done and at 100%, it may say it is extracting data or something at the bottom. when that is done (if it does that) it will say either restart springboard or restart cydia. after doing the command, press the home button and your new iphone video camera will be there at the end of your list =]
CAUTION: THIS DOES VOID THE WARRANTY
but there is almost no chance of anything going wrong. if anything does go wrong, just restart it to factory settings and install the backup you made