this problem is common for Olympus u700. I had it too.
You can take your camera to nearest technical repair shop
or try one of these methods:
* hold OK button while powering up
* power up in SCN mode and when lens comes out just pull it out till the end with force. Dont worry you wont brake it, just pull it out agressivly.
* power up camera in preview mode (play like icon) and push the lans back. this can be done by placing camera with lens down on the table and push the camera down against the table while powering up. Be careful as in this method you can actually brake it. DONT push with too much force. Just enoght so that the lens doesnt come out.
Hope this helps.
This are acutally all solutions which here posted on Olympus forums.
fart
January 2009