iPod iPod Nano doesn't turn on unless reset?

I have a 2GB black iPod Nano (1G). It works perfect but once I hold play/pause to shut it off, it will not come back on by pushing keys.

If I reset it (hold on/off, menu+center) then it turns on and works perfect...until the next time I hold play/pause to shut it off. Then it won't turn back on again unless it's reset. Even plugging it in doesn't get it to turn on...only resetting.

Here is what I have tried so far:
-Complete discharge/recharge
-Restore through iTunes
-Resetting the iPod
-Running diagnostic tests by holding previous+center while reboot. All tests passed.
-Opened iPod and checked battery voltage...battery is good.

I don't know what else to try. Any ideas? Hate to get rid of this thing when it works perfect other than turning on the right way.

If I reset the iPod and get it to turn on, then plug it into the computer to charge and hold play/pause to turn it off, it WILL wake up and turn back on just by pressing any key.

Because it only does that while plugged in (computer's power), I think I will replace the battery and see if that helps.

If anyone has any other suggestions, please let me know!