Leet's check on your iPod's actual play/pause button's functionality.
Put your iPod into Diagnostic Mode:
1 - Reset the iPod.
2 - As soon as you've held the Menu and middle buttons together for 5 seconds, and the screen begins to dim, immediately let off the buttons, and begin to press and hold the middle and "<<" buttons for a few seconds.
It may take a few attempts before you can sucessfully get your iPodin Diagnostic Mode.
When you do, though, use the "<<" and ">>" buttons to click your way through each of the tests there. Scroll down to "KeyTest", click the middle button to begin, and see if your play/pause button passes the test.
If it does seem to pass and do okay, then this is most likely not a physical problem with your iPod's button.
In this case, I would suggest that you would try restoring your iPod, if you haven't already. For more info, check this out ->
How to restore your iPod
-Kylene