Help - ipod shows red lines and displays white screen?

This is the 3rd Ipod Touch, 4th Generation, I've had in 2 years.  Something has been wrong with each one of them.  The one I have now is only 2 months old and unfortunately my Apple Care Warranty has expired, last month.  I was not allowed to purchase a new Apple Care warranty for the new Ipod, so basically I am stuck with another "lemon".  Here's the problem, this time.
My Ipod shows 2 thin red lines which extend half way across the screen from left to right, upper left corner when holding Ipod vertically.  sometimes when turning the Ipod on, the screen is almost all white and I can barely see the time and "slide to unlock".  It always happens when I plug into power.  Also, the red lines flash bright white at times and then extend across the entire screen.  If I take a picture of it, (holding down power and home buttons) it looks normal.
Has anyone else had such a problem?  Can anyone suggest a solution?  I'd like to take this to Apple and say, "What the heck?"  Is it policy to replace a defective product with one that they wouldn't sell in their store but is OK to give as a replacement?  I love my Ipod Touch, but this is extemely frustrating!
IPod Touch, 4th Generation, IOS 6.0.1

I have not seen that problem here before. Likely a hardware bproblem but
Try:
- Reset the iOS device. Nothing will be lost
Reset iOS device: Hold down the On/Off button and the Home button at the same time for at
least ten seconds, until the Apple logo appears.
- Reset all settings
Go to Settings > General > Reset and tap Reset All Settings.
All your preferences and settings are reset. Information (such as contacts and calendars) and media (such as songs and videos) aren’t affected.
- Restore from backup. See:
iOS: How to back up
- Restore to factory settings/new iOS device.
iOS: How to back up your data and set up as a new device
- Make an appointment at the Genius Bar of an Apple store.
Apple Retail Store - Genius Bar
I'd like to take this to Apple and say, "What the heck?" 
Do that but nicely
Is it policy to replace a defective product with one that they wouldn't sell in their store but is OK to give as a replacement?
No. The replacment is a refurbished one that should work like new.

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