Hi Sam, By the sound of it, the digitizer cable may have become dislodged from its connector on the board. My suggestion is, if you are confident to do so, pop the screen up on your phone, and gently push on connector number 2 to push it back into place, try using this video guide to get your screen off, all you'll need is a Phillips cross-head screwdriver, and a small suction cup. Hopefully this should solve your problem, and have your phone fully operational again.
Hi there, If your going to try and replace the screen, im afraid you will need to buy a digitizer and LCD display as a whole piece, due to the two being bonded together. Try using this video guide to help you with the repair, but sorry to say you will need to buy a full screen and digitizer assembly. Hope this helps and you get your iPod back to working order.
Hi Charles, In my opinion, it sounds like the water may have corroded the home button connector inside the phone, due to that connector being attached to the main of the board, via a connector upon the dock, this seems to most likely be your problem. After cleaning the home button connector using the iPhone 4 home button replacement guide, you may find the problem resolved. If ,however, that still doesn't solve your problem, you should either replace the home button flex, or go the whole hog and replace the dock connector.