I too had the same problem with my nano. One day the ENTIRE dial did not work. The battery eventually ran out, I recharged, turned the thing back on, and my nano came back to life EXCEPT I could no longer turn the thing off. I too had to wait for the battery to die in order to turn it off, and was just about to go the service centre.... but
Thanks so much.. Resetting and then turning the play/pause dial seemed to have worked for me..
Good luck to others with the same issue.