The itunes method to download photos is cumbersome. I use ifunbox to download my photos. I have tested this with v1.97 and IOS 5.0 on a iphone 4s.
1) download the install ifunbox
2) Start ifunbox and click on the camera icon in the left hand tree. On the right hand side select all your photos and drag them to your folder
3) once all photos copied then delete them from the camera
4) then you need to click on PhotoData and delete all the Photo.* & changes.* files. If you don't do this then you will still see all your photos in the photo app but a very low quality thumbnails.
Then restart the Photo app and you will have an brand new photo library to start taking photos with.