That doesn't sound good.
There is no point checking the custom functions if the camera is focusing with the shutter button.
You may have a camera problem from what you describe. But sometimes these "problems" turn out to be user error.
It is strange that the lens focuses perfectly sharp and then stops at a blurry position. Watch the focus distance scale on the lens as this happens and see if you can tell what is happening. Does it stop close to the actual distance? or is it way off?
check out the pics i posted...the blurry one is where it stops

