Home Button Fix. I have repaired a bunch of 2g, but never had to get under the Home Button flex pad. But from the symptoms you are describing and more experience I have with iPhone 3 series Home Buttons, I would check when you get a chance that the surface under the Home Buttom flex pad is flat and smooth. I have no real experience with the 2g pad however. Maybe the glue has made an uneven base for the pad so it deforms the pad wrong when you press the overlying Home Button. I know the 2g is very difficult to repair so check this area again as a last resort.
Good luck,
Brad