Panasonic DMC--LZ2 gives me ''memory card error'' message if i put a SanDisk SDHC 4GB card in.

What type and size memory card are you trying to use? The DMC-LZ2 works with MMC and SD cards, 2GB or smaller. It will not work with higher-capacity SDHC cards.

Yes format the memory card. Go into the camera's Menu and select Foemat memory card.

No. The DMC-LZ2 is limited to MMC and SD cards, which top out at 2GB.

The DMC-LZ2 uses SD and MMC cards, not SDHC cards. While SDHC cards will fit into the slot, they are electronically incompatible. You will need to use SD cards 2GB and smaller.

According to the published specs for the DMC-LZ2, no. The DMC-LZ2 works with SD and MMC cards, not SDHC cards.

You need to format the card in the camera to optimize it.

no way to solve...only SD is applicable...4G SDHC is not suitable for it

Sorry for the extreme delay in answering your question: I've been trawling for old unanswered questions today and yours came up. The following answer will undoubtedly be way too late to be of use to you, but may assist others searching FixYa for an answer to the same problem.

You have been mistaking SD cards for SDHC cards. They look the same but are different, and your camera cannot use SDHC cards as it was designed before they existed. The limitation is due to the hardware in your camera so it cannot be updated to SDHC standards.

Your 2GB card was definitely an SD card as SDHC cards have a minimum capacity of 4GB, and 2GB SD cards are the maximum capacity which your camera can handle. Your only fix is to either stick to 2GB maximum capacity SD cards or to replace the camera with one which is SDHC compatible.

this camera will only take up to 2gb

I recently bought a DMC-TZ3 and have been researching memory cards. Several sites sell cards with the camera and list the card type. I would suggest buying one of these cards. Any cards larger than 2gb must be SDHC type SD cards. There appear to different types of SDHC cards, 1.0, 1.1 and 2.0. Check out Wikipedia.org for a description. 2.0 cards are not compatable for devices developed prior to 2.0 so that may be the reason for the camera problem. So far I haven't seen anything that states what type SDHC card the camera requires. I found a computer memory site that that sells memory that they say will work. There may be others.
http://www.mymemory.co.uk/compatible-memory/Digital_Cameras/Panasonic/Panasonic_Lumix_DMC-TZ3