most likely, the clickwheel is damaged, the buttons that are being pressed, are actually on the logic board, and not on the clickwheel itself, so that would explain why the buttons work but not the wheel itself, the center button might be stuck. if you decide to replace the clickwheel, check for obstructions of the buttons, if something is wrong with them. The cable that connects the clickwheel is probably broken, or disconnected, I believe that iFixit has a repair guide for these ipods.