Lee,

Did you replace just the glass or did you buy an entire digitizer frame assemble including the home button and mid frame bezel gasket? Regardless you will need to disassemble it again. Take care when doing so that you don't damage the LCD, ribbon cables etc. When you get it open you need to check the contact for the home button flex which is on the back of the panel and has a gold contact. Also there is another gold spring contact that is on the logic board next to the LCD plug. The two need to line up so that when the digitizer frame is installed they make contact. I attached the picture from the guide but you should follow the guide here:

Installing iPod Touch 2nd Generation Front Panel

I had the same problem when I replaced the glass on my Ipod touch 3rd gen. I carefully removed the plastic frame from the broken glass and replaced the new home button with the old one and frame assembly. Fixed my home button issue.