In response to your questions:

1. Anything can be fixed...for a price. Apple would usually just send you a replacement.

2. Not to me; can't speak for others but I haven't found any reports of problems (not that I looked all that hard).

3. Maybe. Keep in mind that once you send the iHome unit in, then you're at the mercy of iHome and what they'll say and do. You'll also need to take a look at whatever warranty information that came with the unit to see if iHome attempted to establish any coverage and damage limitations on the device. Considering that the iHM2P appears to be hard to find outside of Sears and Toys'R'Us (there may be other retailers, but I didn't see them when I googled the model number), it's hard to know if what you experience is isolated or an endemic problem with the iHM2P. That said, you need to press the point of replacing your Touch with iHome (even it means threat of a small claims suit), or at least having them PAY for its repair and getting them to AGREE TO EITHER OF THESE SOLUTION IN WRITING BEFORE you send the iHM2P in to them, if you choose to send it in at all.