I had an Adata 1 GB SD card go bad in my Kindle. So it is possible. A couple of days after I got the Kindle I went to use it and it was dead. Wouldn't charge, wouldn't reset, etc. After talking to Amazon support and some head scratching I removed the SD card and tried it in my Palm (didn't want to try it it in a card reader on my PC because my PC is way more expensive than my Palm.) The SD card made my Palm go into a soft reset cycle, where the Palm would soft reset, show the time screen and then soft rest again. I quickly turned off my Palm and removed the offending card.
The Kindle was still dead and I was waiting on a call from Amazon customer support. FF to the next day, I get up and my Kindle was working fine! It's been fine ever since. I purchased a Toshiba 1GB SD card and it's been in my Kindle with no problems.
Definitely, check out your SD card in another device to be sure it can be reliably read.
HTH
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