1) Make sure the lens is clean. If not, be gentle to wipe off any dust. Scratches can also alter quality; make sure you take care of the lens.
2) Look through the settings to make sure you didn't accidentally change something important.
3) Call Sony and describe your problem. Have you checked their website for others experiencing the same problem?
You say you had acceptable results earlier, but, just to be clear, camcorders are not made to take excellent still photos. Whenever possible, use a still camera.
I bought this camera earlier this year and was very pleased with the quality of both video and still images. It took great stills even in so-so light conditions without a flash. Lately my still images have been grainy as heck. It doesn't seem to matter what the light conditions are. Bright sunlight gets the same grainy picture as lower light conditions. Any help is appreciated.