The thing dave mentioned is pretty good - try to reset it!
# Toggle the Hold switch on and off. (Slide it to Hold, then turn it off again.)
# Press and hold the Menu and Center (Select) buttons simultaneously until the Apple logo appears, about 6 to 8 seconds. You may need to repeat this step.
the point is - does the iPod reset or not - if yes - then the menu button is not the problem
can you scroll trough the menu???
maybe the click wheel isn't damaged at all, sometimes it only dirt, but cleaning it is not easy - you have to disassemble the whole nano
use this [guide|748|guide] - the needed tools are listed in the guide. the guide is normally for the display replacement - but the click wheel is right under the lcd - so i think that would work either ;-)