I recently had the same problem happen to my iPod. While working out at the gym last week the device spuriously changed the volume, stopped, and sometimes restarted playing all on its own. After my workout I found that the scroll wheel and center button were not responding. The hold button still worked, but that's all. I could not even reset the device. I connected it to my computer and restored the software through iTunes, but that did not fix the problem. So I made an appointment with a local Apple store to get it checked out.
By the time I got it there (two days later), the iPod was dead. The tech at the genius bar plugged it in but could not get it turned on. Since they didn't have any replacements in stock, she set me up for mail-in repair.
A couple of days after I sent my iPod to Apple, I got an email from them saying they were shipping it right back unrepaired because they "have determined that it has been subjected to accidental damage or misuse," with no explanation given as to how they came to that conclusion. I have taken very good care of my iPod, always keeping it in a leatherette case when not in use, so I can't image how they can claim I misused it.
I'd like to hear from anyone who has successfully had this problem fixed.