I had the same problem. Saw on another site to turn camera on so that you have the black screen, then open and close the battery compartment. It took about four tries, but mine started working again. Don't know for how long, though. Just did this today.
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That's because your camera does not have "live view". SLR's only started to get live view recently; it's more difficult for them to achieve it as they work completely differently to regular compact cameras.
With an SLR the whole point has always been to use the optical viewfinder instead of an LCD screen. The screen is just there to view camera settings, menus and to review shots already taken.
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What you're describing is a feature called "live view" (or more accurately "live preview"). It enables the user to treat the LCD like a viewfinder to compose shots just like on any digital compact camera.
Although many newer digital SLR's now have live view, the D60 does not so you cannot achieve what you want. All that the LCD is for is to view photos already taken and to provide camera menus and information in all other modes. Composing the images before pressing the shutter is done solely via the optical viewfinder.
Unfortunately with the EVOLT E-500 it does not have the capability for a live view LCD screen. You must shoot images using the viewfinder only. The newer Olympus SLR cameras now have both viewfinder and live view LCD.
You hit the EVF/LCD button near the "eye hole". When this is pressed it will cycle viewing through either the optical viewfinder or the LCD screen. This display is controlled independantly on each of the modes: shooting, or viewing. This is so you can set the camera to view pics before taking them from the optical viewfinder and view pics once taken from the LCD or vice-versa.