Thought I would chime in. I have the latest version of iPod touch and was having problems with the home button. I was certain it was software, but my wife's iPhone doesn't have this problem, so that led me to believe it was hardware. It's literally less than 4 months old, so I was really peaved considering I have an iPod classic from 2008 that still works perfectly. Anyways, two things. 1. As an electronics/avionics technician, try to avoid any harsh solvents or isopropol alcohol when cleaning the home button. If the solvent is too harsh it could cause damage to the switch or the circuitry, and isopropol has water in it, which is not good for electronics. As someone mentioned before, try to purchase electrical contact cleaner or denatured alcohol for cleaning electronic switches. 2. Before trying any chemicals, try the method that another mentioned of holding the button down and blowing into the connector port (interface and charging port at the bottom). This worked for me and the button immediately started working better. When I first bought my iPod touch, I carried it in my front pants pocket a lot, and my theory is I think that lint and/or dust got in between the button and switch, causing it to be unresponsive. The alcohol trick will work if you've spilled something on the button, or if the unit is much older and thus more dirty. But if it's newer, try blowing it out first. Just my $.02.
JQ