When I was in Singapore the humidity and possibly AC blasting like crazy got the better of my poor old iPod Touch 2nd Gen. I finally had a chance to go to the Genius Bar at the Apple Store today and the guy said it's out of warranty (that's what I figured) and Apple charges a standard fee of $200 for fixes. WHAT!!!!!!!!! That's what I'd heard, but pretty crazy since a new iPhone 4 costs the same price. :)
The guy kindly suggested there were "alternative solutions online", though he mentioned the iPod Touch 2nd Gen screen was a bit harder than others to remove.
I looked into it and it looks like you can buy some "prying tools" for about $4 on Ebay made specifically for iPod screen removal. Sweet. You have to do it carefully as there is some ribbon cable attached that you will rip if you do it too quickly.
After that you remove the screen and digitizer (that, apparently is what is busted in my iPod). You then attach the new one, snap it back together somehow and voila, new iPod.
This sounds a little nerve-wracking and they said you can crack the glass when you open it, but the replacement part comes with glass and the digitizer together which is pretty sweet.
Given that the replacement part is as cheap as about $15 online, and the tools are $5, I think I am going to at least try this out and see if I can get it to work. Pretty nuts but it's worth a shot.