Reboot Loop and Lock Button Fail

I own a 3G iphone that is just a few months out of warranty (approx 2.4yrs old). It has the 4.2.1 OS and I have only ever had legitimate music and apps on it. It has never been jailbroken.
Recently it has started to be glitchy and calls would drop out a lot but now it automatically reboots then crashes after about 4 seconds, attempts to reboot again and then crashes. The cycle continues on and on...regardless of how charged the battery is. The only way I can get the phone to respond is to plug it into a charger or itunes and then it behaves normally, apart from the lock button not working. Obviously I can't have it plugged in 24/7 so I need to get it fixed. Once unplugged the phone lasts until it automatically locks (after 1 min) then starts cycling again.
I attempted to restore it to my previous sync but the same error kept happening so I put it back to factory settings. I managed to wipe all my apps and contacts...but not the glitch I attempted to reset it to factory settings approx 3 times in the hope that it would take the hint and GET IT TO RESET! But it is being stubborn and I'm not impressed.
Any solutions?

i should also note that the button has been slowly failing over the last month, until it finally stopped working all together, making it impossible to lock the screen or turn the phone off.

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