Pictures are stored but not displayed in Camera Roll
To free space in iPhotos ("Camera Roll"), on your iPhone (or iPad) go to:

Albums > Recently Deleted and then select the photos for permanent deletion.  I'll bet you have tons of photos there gobbing up space.  That should take a lot of pressure off on your available space for photos.  Myself, well I didn't know that was there for ages ... ;-)

Update: After further details from the OP, sounds like he CAN take pictures and they are stored on the device, but these pics are just not appearing in "Camera Roll".  I suspect "Camera Roll" is an alias to the DCIM storage location.  Could be something wrong with how the thumbnails linking to the DCIM storage folder you reference are added.  Thus, the advice you were receiving on removing the SQL-lite db.

Camera Roll itself must be an alias to that DCIM folder.  It would make no logical sense to have pictures stored in BOTH the DCIM folder and also Camera Roll.  How these things interact would appear to be where the problem exists.

I remember with Outlook .pst folders there was a (2) GB limit (I believe) that buggered everything once the file hit 2GB.  I just checked this for you and the max SQL Lite file size is 140 TB, so this can't be the problem.  HOWEVER, the size of the query as to what's retrievable in memory from a huge SQL Lite DB CAN be a limiting factor:

https://stackoverflow.com/questions/14451624/will-sqlite-performance-degrade-if-the-database-size-is-greater-than-2-gigabytes

The upper limit as to the SQL query to the SQL Lite DB required to display the pics in "Camera Roll" looks a likely candidate if your pictures store is huge and the query size required to display them in Camera Roll is limited in memory