It's not my fault that Apple makes cheap ipods &
would rather replace them, instead of a small
investment & fix (repair) them.
Actually, they do fix them; they just send you a replacement (refurbished or new) to speed up the turn-around time. When I had to replace my ipod it only took 5 days from the day I sent it out to the day I recieved a replacement. If they actually took and fixed your specific ipod and returned it to you then it would take much longer and would be a logistical nightmare (I think they send them to china to be fixed, but I'm not positive).
That aside, what steps have you actually taken to replace it? Did you send it in and it was rejected and sent back? If you haven't tried sending it in, then go to this link
http://depot.info.apple.com/ipod/. Read through the troubleshooting steps and if it still doesn't work, then you can enter your ipods serial number (engraved on the back of the ipod) to get started on the replacement process. If the screen really is nicked as you said and not cracked then you should qualify for a replacement.
You're right, for something so expensive they shouldn't break so easily, but the case remains that electronics in general are pretty fragile and don't like being dropped. I would recommend that if you are able to get a replacement or fix the current one that you buy a protective case for it, preferably something soft (like silicone) that will absorb the energy of a fall and protect your hard drive. If your son is at all active this is almost a necessity.
Anyways, I hope this helps. Good luck and sorry for the long post!