Bad CCD Sensor
Sounds like the CCD sensor has died.
Some background on the problem.
Some time ago Sony sold a batch of defective CCD sensors to Canon and several other camera makers.
Canon will repair the cameras with that bad sensor for free.
Canon released a list of cameras with that bad sensor.
Later they added to that list.
The Canon S2-IS is not on that list.........but.........
the canon S1-IS is on the second list.
Some People have successfully argued with Canon repair and got them to fix a S2-IS camera for free.
Some people have not been successful in this endeavor.
I suggest you go to the following link and read all about the problem:
Then contact Canon and tell them you are aware of the recall on the S1-IS camera and your S2-IS camera probably has the same bad Sony sensor too. After all, they have had to add to their recall list before.....maybe they still have undetected bad sensors in some cameras (like yours).
Be insistent but not rude.