Here is what I would do :) open the case (carefully and be patient it's a bear to open) follow the instructions on ifixit in how to open it. Now with the back open you will see the small circuit board that holds the headphone connector as well as the hold switch. remove this small circuit board.turn it over and you will see a small switch that engages the hold. iPod 4th Generation or Photo Headphone Jack Replacement step twelve shows it nicely.The switch has a small piece that is usually engaged in a notch on the hold slider which is on top of the back of the case. With the back separated, can you move the slider? Can you move the switch on slider on the circuit board? if yes to both, I bet that the case was opened and the notch in the slider not properly engaged with the switch. If you can not slide the switch on the circuit board then you most likely will have to replace that. Please be careful since any of these parts are small and do not require much force to break ( been there, done that :) ) I have not seen the part on ifixit but purchased one for myself of ebay.
Hope this helps and sorry for being so long winded, good luck.