Home button completely unresponsive since upgrading my 3.1 3G to iOS4

At first I thought it was just being terribly slow, like the rest of complaints.
If is started any app, I would not be able to get back the home screen, unless I turn the phone off and on again.
This happened immediately after the update to 4.01

Just an update.
I went to the Apple Store in Winnipeg, Manitoba and was told I had to buy a new iPhone.
What kind of scam is this?
Apple nags me update my iPhone software, and when I do, it breaks my phone.
The fix is for ME to buy a new iPhone.
< Edited by Host >

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    Added more info ~ 

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