For the first time, you get a reason not to jail break iPhone 2G, 3G. Apple has approved iVideoCamera application (0.99$) for recording video on iPhone 2G and iPhone 3G.
iVideoCamera records 10 frames in a second having 320X426 resolution. video sharing is in build in the application. One can share recorded video easily
1. On popular websites like facebook, twitter, YouTube, Flicker Video, Vimeo
2. FTP video transfer
3. WiFi video transfer to a computer

I am big fan of cycorder video recorder. Recorder very well adds the missing feature of recording in iPhone 2G, 3G.
It really sucks at times when one records a video and try to play this and it displays a message that video can’t be played.
As of now there is no solution present as per my knowledge . There is some hope after seeing road map on Saurik’s site. It may take a month or two for the next release. So don’t delete your important videos, which are corrupted. You can be able to play them after a while .

There are few paid video recorder available in iPhone. I tried one of them but was not happy with the quality and it takes too much time in saving video to the disk. Recently I tried cycorder, which is available free of cost. I like this recorder as it doesn’t take time in saving video. Quality of recorded video is awesome. You can’t expect better quality than this in 2 M Pixel camera.
To install cycorder, you must have jailbroken iPhone which is running firmware 2.0 or above. Go to cydia search option and type cycorder. Now install it like you installed other packages using cydia.