I realize this is an old thread, but just as good.
I just did this fix as a buddy came to me asking if I knew why the click wheel on his iPod nano was no longer working, I reset the iPod as this usually clears any issues with apple products. This of course did not work. I then searched the internet, some saying to use alcohol to clean the contacts on the wheel by allowing it to soak into the wheel, this obviously did nothing. I then searched again and came across this old posting. I followed it as it is very self explanatory. Amazing this fix worked like a charm. I showed my buddy and he is happier then a pig in $@$* that it is fixed. Unfortunately we lost his mix on the device, it was old music, so now to add some newer tunes for him. Awesome fix people.
thanks