Warranty for broken hold switch?

A friend of mine (I'm stuck with a 3G 20GB iPod!) has a 1st gen. 4GB Nano that is experiencing problems. The hold switch doesn't work all of the time, i.e. sometimes you move the switch and it will 'unlock' the Nano, and sometimes it won't.
It seems like a physical problem, maybe a bad solder joint or something similar to that. The Nano exhibits no signs of external damage or dropping. It's still under the original 1-year warranty, if she sends it back will she have to pay for the repair? I've never used the Service Depot so I don't know how it works. If it was a broken screen clearly caused by impact, I would expect to have to pay, but with something like this I'm not sure what the deal is.
Anyone have experience they could share? Thanks!

Fill out a service request.
Service request.
This about the warranty and any charges.
"Your iPod is covered for one year by Apple’s Limited Warranty for iPod. Warranty service for eligible repairs is available at no charge for twelve months from the date of original retail purchase (”date of purchase”). If you have purchased an AppleCare Protection Plan for iPod, there will be no shipping and handling fee. A $29.95 shipping and handling fee will apply to all warranty repairs performed six months after date of purchase."

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Hold Switch

Not sure when I realized it was broken, but I think it was 1/2 mo. to 1 mo. ago. I traded in my iPod for a new one in May/June, because the USB was fried from trying to charge it on an old computer. I never used the new one on the old computer, and the hold switch definitely worked on my old one, so I doubt there's any connection.
The lock that shows up at the top of the screen will sometimes flash on and off, not rapidly, but occasionally, and only when I have the hold switch on. When the hold switch is on but the lock isn't showing, it's the same as if the hold switch wasn't on at all.
Thanks for any help
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Last week, I noticed my hold switch was starting to collapse into the iPod. One side of it was lopsided, and I was required to use my fingernail to push it out of Hold. Today, it was pushed so far in, that it's difficult to get it out even using my fingernail. I have never put any extreme pressure on the hold button, and I've only dropped the iPod a few times, never on a hard surface and not for a long time.
I've only had this iPod since around May, when my second iPod mini (the first one broke, of course) died and I sent it back to Best Buy and got $200-something in store credit. So I paid the $70 to get a new iPod video, and didn't get an extended warranty again. I guess I didn't need it, considering the thing could only go 4 months without starting to show problems.
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My suggestion...
If you can, go in person to your nearest Apple Retail store and have it looked at by someone at the Genius Bar.
(At some stores, there may be a separate bar specifically for iPods).
It is crucial to make an appointment online. I wouldn't recommend going there in person without making an online appointment 1st. Expect a LONG wait if you do go without making the online reservation.
If you are a ProCare member, I believe you can make an appointment up to one week in advance. If you are NOT a member, you can only make an appointment the same day.
Go to the link below for more information...
http://www.apple.com/retail/geniusbar/

Warranty for broken hold switch?

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