Damaged Olympus 2GB xD Card

[Raindance]

I was taking photos and the odd small video at my daughters 5th birthday party using a 2GB xD Olympus Card (genuine bought from Olympus) with my Olympus SP-570UZ camera when suddenly the camera started making an error noise (like when the lens cover is on for example) and it said on the screen "Card Setup - clean contact areas with a dry cloth." I removed the card and cleaned the contact area gently with a dry cloth (a number of times) but the problem remains. The camera keeps saying the same thing and when I put the card into my card reader it is not recognizing it. Have I lost all my photos/videos or will I be able to recover the files? I'm hoping it's a "Logical" problem rather than a "Physical" problem as from what I read on the internet the latter can be a nightmare and may mean that my data is lost for good. It is very upsetting as it was my daughters 5th birthday party as I say, so I'm REALLY hoping someone can give me some advice and help me recover my data.

I have started using ZAR (Free Version) but it is taking a very long time to complete. It has been running for over an hour now and it's only 2% complete for a 2GB xD card? It is coming up with a number of red (bad sector) squares and also a similar number of blue (data fragments) squares. I have 3 questions - 1) is it normal for it to take so long to complete a recovery for a 2GB Olympus xD Card? 2) Do the red (bad sectors) mean that I have permanently lost data? 3) Does running ZAR stop me from trying any other methods like taking it into a professional recovery place - i.e. will they have problems because i have already run ZAR?

I look forward to hearing from you as this is quite a worry as you can imagine..!! Thanks in anticipation of your reply.