I just send my 5th ipod touch 1st gen to apple, because again I found a few stuck pixels, its my second ipod I send to apple, the other 3 I had sended back to the store!
So now i have wrote an letter with the ipod with suggestions..
It's a pixel that's doesn't respond like the rest of them. E.g. it stays a certain colour (white, for example) so when you're watching a video and a dark scene is on, you will see the 'dead' pixel.
Since the pixels are so small it's hard to notice. I have 1 itty bitty tiny pixel that's stuck on green, but it's not worth exchanging for. I don't really notice it unless I'm looking for it. Plus, exchanging it would mean sending it back to Apple, if they will engrave a new one for me. If I exchange it at an Apple Store, I doubt they have engraving equipment on-site.