IPod, restarting, text fading, clickwheel inactive

I purchased an 80 5G ipod at the beginning of November, 2006. Since then, I have experienced 2 major issues with this thing. The first was completely my own fault - upon disconnecting the iPod from my computer, I yanked the USB cable out as soon as the icon disappeared from the desktop. The iPod still had all the songs, but there was nothing in my music folder. There was no way of retrieving all the 80GB of songs I had stored on it. A wave of massive depression ensued.
Then, last week, when things were finally going smoothly again, another issue happend. I was listening to a track, and it just died. The text menu on the iPod sort of faded like a nintendo which just shat itself.
But, I plugged it into my computer at the office, and all the songs were still there. So, I unplugged the iPod from the USB cable, and all of a sudden, the thing restarted itself. The clickwheel stopped working. I restarted it using the buttons - and it worked. Was the clickwheel really not working?
I decided to restore the iPod in iTunes again. After the restart, the click wheel was still inactive. The only button which worked was the 'hold' button. When I turned it on, the little lock would show up on the screen, then, when I took it off HOLD, the text suddenly began to fade again. I'd press any button on the iPod and the thing would just begin the restart cycle again.
I went to the mac store. First thing they said was, "not under warranty". The next thing they said was "probably a 'chip' issue." The only alternative they suggested was to get it replaced for about 18000 YEN (i'm guessing about 140-160 US dollars). I wasn't willing to spend that much on something I had already spent over 300 for (which only lasted a year and a bit).
I asked the store attendant to restore it again - he used disk utility to wipe it clean, and then ran the iPod restore in iTunes.
The Ipod still didn't working.
I had a 1G iPod which lasted 5 years. By the end of its life, it would only work for about 40 minutes, but it never had any problems. In fact, every apple product I have purchased, until now, has NEVER had any major issues like this. I was not happy.
BUT, I come into work today, and the bloody thing started working again. ***.
G4 Powerbook   Mac OS X (10.4.10)  
G4 Powerbook   Mac OS X (10.4.10)  
G4 Powerbook   Mac OS X (10.4.10)  

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