I recently bought an arduino duemilanove. I was able to connect it a an LCD [HD44780]. It worked for a while but now it doesn't seem to work anymore. I have tested serial communication on the board and it works fine. i can blink led's on on all digital out puts. Any help will be great appreciated. I have came to a conclusion that the arduino board will operte LEDs but not display characters on a LCD. Thanks in advance.
If you disconnected and reconnected the LCD, the most likely problem is that you made a mistake in reconnecting it. E.g., got a couple of wires crossed.
Another possibility, if you're getting power from the Arduino, is that you're overtaxing its power supply. Especially if the LCD has a power-hungry backlight.
Ran
Just to underline that the point you make:-
I have came to a conclusion that the arduino board will operte LEDs but not display characters on a LCD.
Is not true, and does not make sense.
If a board can control an LED it can control the signal lines to talk to an LCD module.
Electronics and computing are a very humbling occupation in that 99.99% of the time when it doesn't work it is your fault.
We have all been there. 
Alhamdullahi, my LCD works now. Thanks for all the support. I have two LCD's :
16x1[8x2] KS0066 - still doesnt work. Insha Allah, I test the timings with an 8051.
40x4 - HD44780 - I'm able to control the lines independently thansk to this guy.... http://blog.wdka.nl/crosslab-diy/2009/06/25/liquid-crystal-display-wd-c2704m-and-the-arduino/
now the trial continues