I60 gig: Dial keeps stalling!!!

I have this 160 gig I-Pod classic since January. Fro the beginning I have had this issue of the dial greezing after I flip the 'Hold' switch to the unlock position. Everything else seems to work expect the rotating dial. Thus I can't alter the volume or browse through my library all the while being able to skip to the beginning/ end of the current tune, play/ pause the current track and go up one level on the menu.

I figured out the solution recently. This was to put the I-Pod on 'Hold' again and then release the hold lock. Although I have cracked the code I cannot accept that this is how it was meant to be.

Anyone else faced this issue?

Best regards

Have you considered a restore for that iPod fist

Is it still under warranty

No I haven't yet considered restoring the unit.
Yes its under warranty. You suggest I take it to an Apple store?

Restored the I-Pod. Problem still persists. On top of that from time to time the music just stops playing only to start again a few seconds later during which time I can feel/ hear the HDD rotating furiously.