Long-time PSP Fanboy reader Joel used the PSP camera to take pictures from his trip to Paris. He seems pleased by the camera's performance, especially considering its budget price. Take a look for yourself in his Flickr photostream. A close-up look at the pictures reveals tons of artifacting and other visual glitches, meaning the camera won't replace a dedicated digital camera.
One of the more crucial problems with the camera appears to be how it reacts to sunlight. "I wanted to take a picture of the Eiffel Tower with the sunset. And guess what happened: for one little second, the sun was SO bright my eyes hurt and I had to close them, and the camera went completely black. The sun killed the lens for some time. I watching and taking pictures, all black, until I turned off the PSP completely, and rebooted it, and it was working again. My hypothesis is that the Sun might kill the lenses for a little time if it's too bright."
It doesn't come as too surprising that such a cheap camera won't handle the sun's powerful rays. Hopefully, if Sony ever decides to officially release the peripheral in the States, the camera will be able to handle a bit more.