The lens and flash are very close together, in fact the flash is right
above the lens unit slightly to its left.

There is actually a warning in the manual about white dots appearing
on the picture, which it claims is a phenomenom that occurs with
digital cameras.

But I have been shooting with digital cameras for years and never saw
this problem on any other camera consistently like this one, which
suggests to me either a fault with this particular camera or design
fault - such as you suggest, the flash is too close to the lens.

I have in addition to this camera a Powershot S1 and this camera takes
flawless flash pictures, except for one day when the lens was dirty or
had rainspots on it - never saw that happen again, whereas the A400
has done it almost all the time.

Comment from the retailer (a professional photo retailer rather than a
chain store) is that they have seen no other instances of this sort of
thing nor a rash of camera users coming in reporting similar problems.

If it is a design issue with this particular camera, I would have
expected to see more instances.

But as this is a basic point and shoot model it may be that the
typical user is a novice or someone who doesn't use the camera very
much and doesn't notice these things.

The retailer is very much on my side as is the law in this country -
so we wait for the next development. Right now my job is to take some
more photos to see if the problem is still occurring.

But then there has to be a lot of dust around. None of these photos
were taken in dusty conditions.