Hey, I had the same problem and using the debug menu mentioned above, I could confirm that the headphone jack was faulty - it sensed falsely that the headphones had been removed and paused itself. My first try was to use a small flathead screwdriver to gently nudge out the little contact metal inside the headphone port. Miracously, that worked and it seems that I got my iPod back to working normally. So try this if you have the problem: bending out the little piece of metal you can see when you look in the headphone port, using a tiny screwdriver or a needle, paperclip etc. The contact will be permanent and no faulty pausing will occur.