PINO, drying it out is not going to fix it. You will get corrosion on your logic board etc. I strongly suggest that the first thing you do, is to clean it. Use this guide to see how to clean it. It was written for an iPhone 3G but all the points still pertain to your iPod as well. Here are the guides to work on your iPod. After you have it properly cleaned, replace the battery and reevaluate. It does sound like you are having issues with either the backlight coil or the LCD itself. Right now, the only thing that I would definitely replace is the battery. Hope this helps, good luck.
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