I am currently waiting to hear back from Apple later today (Weds) on several issues including this one. I discovered the "other" storage issue when shooting a video when after only a few minutes into it I got a message and the video shut off. When looking at my usage only 947 mb of space was available on my 16GB phone. I have only 3 pages of apps, 126 songs and 110 contacts. Finally someone at Apple was able to give me a few steps to take to temporarily solve the storage problem but it is somewhat of a pain. These steps were given to me after we tried several restores and when nothing else worked.
Connect the phone to itunes (so much for pc free on ios5),
Make sure your device is highlighted,
Click Edit at the top of the itunes page,
Go to Preferences,
Once Preferences opens up, select Devices,
In Devices click on Reset Sync History then click Ok,
When the window closes, Sync your device in itunes while connected (again so much for pc free),
After the phone syncs, disconnect your phone and turn it off and then back on. You may have to sync again, but so far I haven't had to at the end of the these steps.
Your "other" usage should be back down to a reasonable amount. Prior to these steps my phone was holding 9.8 GB from video that I had shot but then deleted. There is no reason why the phone was still holding onto that memory space but after completing these steps the usage issue was corrected. The problem still remains because after shooting any video, I have to upload the video onto a jump drive if its important (family, vacations, etc) and then follow these steps right away in order to free up the space even after I delete the video from the phone. Quite the pain in the rear for something so simple.