Hopefully this troubleshooting page can help you out: [[Sanyo VPC S1275 Troubleshooting]]
It sounds to me like the fall might have mis-aligned some internal parts, preventing it from zooming further. (A digital zoom on pictures you've already taken and are viewing on the screen is unrelated to the lens zooming in and out.)
I also found [http://camerarepair.blogspot.com/2007/12/fixing-lens-error-on-digital-camera.html|this guide] on how to fix lens errors, but it sounds a bit risky for your camera, so be careful. Hope this helps!