I am not alone in this. In fact there is a list of approximately fifty people with the same problem on XDA. That thread is full of flames, conspiracy theories and wild theories, but at the end of the day a considerable amount of the users reporting the issue have either posted a photo or have accounts older than May.
HTC said that physical damage is usually not covered by warranty, and that if I decided not to go ahead with the repair after hearing their quote (which others have reported will be $90) I would still have to pay £25 postage to get the phone back. Citizen's Advice said that under the Supply of Goods and Services Act 1982 Three are responsible for supplying me goods that are of "satisfactory quality" which should last a "reasonable" amount of time, however they are really not interested and say that I should have noticed if there was something wrong with the phone when I bought it.
UPDATE: I took Three to court (quite easy to do online) and won by default when they continued to ignore the situation. They only paid up (the full price of the phone) when I threatened to send in the bailiffs.
UPDATE: I paid HTC a total of £85 to repair the cracked camera glass. There are now many walk throughs, including videos, showing you how to replace the glass yourself, which could be much cheaper.