Montana:
I'll fill you in on my experience. I have cracked the case on a 2nd gen iPod a couple of times. First time was for battery replacement. The battery reseller included a couple of tools and instructions on how to open the case. No problem doing that, but it is delicate operation and you've got to be careful not to sever any connectors. Then I had the misfortune of a young kid sticking my Ipod to a magnetic cell phone holder OUCH!! That hosed the drive. Went on line looking for a replacment hard drive for $139 I decided better to spend another $100 and get a brand new replacement.
If you were to send the iPod back to Apple, you've got the repair costs whatever they could be. They do tell you to make sure you have a backup, because chances are you're not getting back your original iPod but a replacment. When you add that all up you just want to consider a new unit.