Can you describe the sound? I had a generator fail on me once; it was a very nice Sanyo one that mounts under the BB, but I hadn't used it in a few years. I mounted it on my new bike, and it worked great. But after less than a mile it started making these high-pitched squeals intermittently; and every time the dynamo screamed, the light would go out for a second. It kept that up for a few miles; getting better for a while, getting worse for a while; but before I got to destination it became all squeal and no light. Is that what yours did?
Basically the same effect, but the noise was a crunching/grinding sound. Before it killed over, it was making a droning sound that I thought might be my tire rubbing my fender, but I was pretty certain it was the generator. It just got worse and worse until it died. Now, just pushing the bike walking causes it to make the grinding crunch noise.
I took it to the bike shop at lunch today, and they said they would call Specialized to see if it has a warranty or whatever. If it doesn't, I will probably mount a flashlight or get some other cheap alternative until I replace it with that other brand generator mentioned above.