Simple fix. This issue is not the button itself, it will be the flex beneath it that is the issue.Try to find some rubber of some sort that wont degrade. When i have come across this issue i use the rubber from HTC home buttons. Cut a very small piece out (approximately the size of the home button flex (pictured below)
[image|112576|size=thumbnail]
Use some fast drying glue/super glue and glue it inside the small circle. Make sure you are carful as you only have one shot at this as super glue dries very quickly. But don't worry too much if you break it as it is already possibly broken. Put the rubber in place and wait minimum 5 minutes for it to dry. Replace ribbon and home button and hope for the best! If it still does not work you can either buy a new Headphone jack assembly and install (make sure you know what you are doing before carrying out this type of part replacement as it is rather difficult) or you can buy a new back assembly and it will be pre-installed for you.
Headphone jack assembly -
[product|IF137-004]
Back assembly -
http://www.macfixit.com.au/shop/index.php?_a=viewProd&productId=1282