I dropped my iPhone on my desk and it seemed to be fine, when I plugged in head phones I noticed the screen was all white, the phone was still working so I figured it was something software related, did a reboot and the phone was working only until it when to sleep and then white screen, doing some google searches reveled that its a LCD issue with 3Gs iPhones.
The fix is to replace the LCD display, if this is something you are not comfortable with then you would need to take it get fixed or sell it on ebay and get a new phone.
I replaced the LCD myself, $18 off Amazon for a working replacement, replaced LCD and all is working again. Instructions for replacing the LCD are on youtube.
I would rate this repair a 3 out 5 for difficulty, 1 being easy and 5 being very difficult.
