I'm sorry for the difficulties you're experiencing as the Internal Memory of the Camcorder is not working. Based on the information you have provided, it appears that the Internal Memory of the Camcorder is corrupted. Since you're not able to format the Internal Memory, please follow the below troubleshooting steps and check the operation.
1. Perform Reset by following steps:
1. Locate the RESET button behind the LCD panel of the camcorder.
2. Use a pointed object (like a ballpoint pen) to press and hold the RESET button for 2-3 seconds.
3. After 2-3 seconds has elapsed, release the RESET button.
You can locate the reset button from the below picture.
2. Perform a manual power reset by following the steps:
1. Turn off the camcorder.
2. Disconnect AC power adapter.
3. Remove the battery pack.
4. Move the POWER switch to the CAMERA position for 15 seconds.
5. Move the POWER switch to the OFF position.
6. Reconnect the AC power adapter or reinsert the battery pack.
7. Turn on the camcorder.
Remove the Memory card from Camcorder, connect it to a computer and check whether the Internal Memory is recognizing there. If recognizing, first format using Computer and then format using the Format option in the Camcorder.
If the issue persists after following all the steps service will be required. You can find repair information and initiate service at:
http://www.fixya.com/repair
Thanks for understanding. Please let me know if you require any clarifications.