They are fine. Toyota got wrapped in the knuckles pretty hard when a few owners developed sludge problems. It was a big enough group to attract some attention (and a class action lawsuit), but relative to the number of models sold, a drop in the bucket.
I have both sludge and oil consumption in my 1ZZ-FE from the same era. I look at it as a challenge
The car purrs like a kitten and gets 30 mpg no problem (right in line with what it was rated for the day it left the factory 10 years ago).
The oil consumption in mine is due to a design defect that causes the piston rings to stick. Owners have come up with various creative ways of tackling it that are relatively cheap.
The sludge, in my case and probably true of the "sludge Camry's" too, is due to owner neglect. With standard OCIs on these cars being fairly high, for their time, and most purchasers still likely meeting one or more "severe service" criteria, yet still sticking to the standard OCI interval in the owner manual. Result? Sludge.
Not every Camry developed the sludge problem, and its reversible. Not as a big an issue as some make it out to be, so long as its caught and corrected, anyway. Much ado about nothing IMHO. Almost any used car is going to come with some kinks. At least this one isn't difficult or expensive to correct. And whether they are oil burners or "sludge monsters" they still somehow manage to last almost forever, and by owners who mistreat and neglect them.
Okay I'm going to stop there. I'm starting to sound like a spokesman for the SPCA.
-Spyder