That could be 1 of 2 problems: Either the click wheel has came loose or has jammed, which will be a simple fix if you take it to an ipod repair place and you will only have to pay labor, or your controls on the motherboard have went bad and you may need a new motherboard which cost up to around $60.
It's likely that you have to replacethe clickwheel. It's not permanently on hold is it? If the latter is the case it's your hold switch.
There is a service called ipod repair nyc that can repair it for you can use an iPod nano repair guide that shows you how to replace the screen yourself, the part is on ebay.
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