Sorry, but I am definitely NOT kidding. I have had the mm50 for a long time now, and have never, EVER had a problem with it. That is, until I got this iPod Classic. 2nd gen 8GB iPod nano, which I am using as I type this, works flawlessly. I had a 5th gen iPod that also worked just fine. It has nothing to do with the grating over the sensor. Like others have said if this was the problem none of the remote's functions would work properly, not just the fwd/skip buttons.
In any case, I have emailed feedback/support, and I hope everyone else does the same. I'm not going to wait though, and I'm returning my iPod tonight (to Costco). No way am I going to wait around for Apple to fix this. If you read up, there are all kinds of problems with the iPod Touch as well. Apple isn't spending the time it should on design and quality control it seems. No more of my hard-earned money is going to Apple until they can prove these things will work as they should!