Try re-seating the card again, to make sure it has good contact. Make sure the card works on another device, as its possible the card itself may be damaged or corrupt. You can also try a factory reset on the phone, to see if its a software issue. Otherwise, its possible the card tray may be damaged, in which case you will need to get a replacement phone.
some needed info. are you running the stock htc rom or are you running a custom flavor of 2.2/2.3 gingerbread? if your running anything like cm7, it could be a corrumpted/in-complete rom flash. if its stock if after checking the sd card, resetting the phone it could only be hardware. hope that helps.