I'm going through this right now as well. I ran my own business for 7 years, making content websites monetized through google adsense, building games, and freelancing, among other things. The primary source of revenue was adsense, and it paid the bills enough for me not to need a "real job" for years. 18 months ago, the adsense revenue started to dry up, and in an effort to make some additional income, I started looking for a normal job again.
I ended up reluctantly taking a job working for the State of California, mostly because the schedule was flexible and it was a 5 minute commute. In the last 18 months I've gotten two promotions, including one four months after I started which is unheard of in state service (and which my bosses had to fight HR to get). I spearheaded the acquisition and implemented of a version control system, which no one hear had ever used (they were just FTPing files all the time, risking overwriting of others' work etc), and got buy-in from all the developers who now say they couldn't imagine working without it. I also now wear a variety of hats besides programming including sysadmin work, dba work, architecture design, etc. My bosses rely on me more and more everyday just for my opinions and advice, let alone the work I do.
Yet now, when I send out my resume, it's almost always crickets. A year and a half ago, when the first item on my work experience list was "failed entrepreneurship", the response rate to my resume was about 80% (not even talking about interviews, just getting a response at all). Now it's more like 20%, all because the first item in my work experience section is my current job working in public service.
I admit, many of my coworkers probably deserve the reputation that public sector work has. A significant number of them are clock-watchers that the bosses don't even try to assign anything important to, because they know they don't give a shit and can't easily be fired (union), they are just filling a chair waiting for their public pension to accumulate over 20-30 years. Nevertheless, I also list on my resume all of the above, including the pioneering (for us) work I've accomplished here implementing version control etc. I never intended to stay here more than a couple of years, but I also never intended for this job to have such a negative impact on my job prospects.
I think I am probably going to revise my resume to leave this job off completely, and just say I've been working for myself for 9 years instead of 7. I predict sadly that this will return the response rate back to what it was before I had this job.