It does sound like something is not set correctly.
Especially the part about having only two options (auto flash and no flash).
But I can't think of anything that would cause that.
Just for kicks. Put the camera in Shutter Priority mode and then check to see what flash options you find.
I bought the camera 2 years ago and it worked ok until yesterday. I turned it on and went to take an indoor picture using the auto mode and automatic flash, and the flash didn't go off. The room wasn't well lit, so it should have. I checked to make sure I didn't have the flash turned off and noticed that I could only choose between auto flash and no flash, whereas I thought there was a forced flash choice before. I tried again, and still no flash.
Then I took it outside, where it was sunny, and the flash went off on autoflash. It shouldn't have. It seems to be confusing light and dark situations.
I thought maybe I hit something by mistake and changed a setting, so I pressed the menu button to restore it to default, and the flash still won't go off indoors. I even took out the batteries and charged them up again, and then tried another set of batteries.
It's out of warranty and I probably don't want to pay to get it fixed because I just got a Nikon D50, but does anyone know why it's doing this or any way to fix it? I don't understand because it worked fine the other day and it wasn't dropped or anything. Thanks.