Sounds like a problem with the digitizer. Mine started out like this and got worse. I have owned my Palm for about 1-1/2 years and at least twice I had to do the following as my touch screen eventually quit working and I couldn't get the digitizer to fix it either. Below is what I have found that works and so far is the only solution. I think this is a bug in the system, but PALM has not yet posted any info or a patch to correct it. Unfortunately, this will erase all your data so be sure to back it up first.
-------------------
Sounds like the digitizer is so far off that the input won't align correctly. This would, most likely, be confirmed if you get any response when you tap the touchscreen (moving cursor, beeping, etc). You'll need to try a soft reset using the little reset tool in the end of your stylus, or a paperclip if you don't have it. Press and hold the reset button inside the unit (located in the back panel) for a few seconds until it chimes and you see the Palm logo. Then try the Digitizer again to calibrate.
Now, if that doesn't work, you may need to factory reset the device. THAT MEANS YOU LOSE ALL YOUR DATA, so do whatever you can to get it backed up. You simply hold the reset, then press and hold the power button for several seconds. Instead of the standard Palm logo you'll see a prompt asking you to press up on the touchpad, on the front of the unit, to reset it to factory default. It will then run you through the initial setup routine to set the date, time and finally calibrate the Digitizer.
Add the things you own to your My Products collection and get product information, solutions to problems, manuals & guides, tips and how-to's, reviews & ratings and local repair service - all in one easy place.