We've tried and witnessed that there is an application called Drunknbase which can record 50 frames on the iPhone at a whole 2 Mpixel resolution. It can also play the file instantly back, but so far it cannot save it as a file.
The guys who made this are working on the full version, but one thing is clear after MMS iPhone users got the video recorder that needs some polishing.
You can read it all here and we've tried it and we can confirm it works. It is not the solution for all problems, but it sounds like a good start.