Today, SpaceX confirmed that when Stage 1 separated from their Falcon 1 demonstration launch, it bumped the stage 2 engine. However, he said "Yes, the stage sep bump will obviously need to be addressed, however it does not appear to have caused damage."
It has been conjectured by many that this was the cause of the rapid oscillation of the second stage just before telemetry was lost. It is still unclear as to what caused the second stage engine to stop early. But there is good news:
"We had some blips in telemetry, but were able to obtain a data feed for almost the entire flight time. The stage rotation caused the signal/noise to vary from strong to weak, as the antenna position changed and the distance from the receiving dish increased. However, with some additional work, we managed to reconstruct almost all the data."
They were also unable to recover the first stage because of an error with the GPS module.
There will be an update on SpaceX.com next week.