"Jaundice Effect" Revisited...
Okay...my iPhone 4, which I've had since July, takes good pics with the flash in low light, no yellow "jaundice effect" at all. My wife's iPhone, which we just purchased a few days ago, has the "jaundice effect". I took both iPhones into a darkened room, and turned on the video light on both to keep the LEDs illuminated, and shone them both against a white wall. There is a noticeable difference in the color of the LEDs. Mine is a cool white light, but hers is noticeably warmer.
To rule out possible differences caused by software (JB iOS 4.0.1 vs. iOS 4.1), I also took pictures in a darkened room with her iPhone, after turning off her flash and using the LED on my iPhone for illumination. The photos looked fine.
This makes me wonder if the "jaundice" effect, which only occurs on some phones, is caused by a defective LED flash on those phones.