iPod Touch won't turn on without charger

I bought a water damaged iPod Touch 2G 8GB that won't turn on without a charger. I replaced the battery with a brand new battery and it is charging up normally and turning on. If I let it sit for a minute, the top button won't bring it out of sleep, only the home button will. Once I bring it out of sleep, if I hold the top button to bring up the power off menu, it works so I know the button isn't broken. If the iPod is off, the only way to turn it on is to plug it in to a charger for a second and let that "jump start" it.

Is this a firmware issue or hardware issue? I'm still waiting on a Digitizer so I can't slide to unlock and actually play with it.