SOURCE: iphone lower strip of touchscreen not working
The digitizer is damaged on your iPhone. Since it is a 2G I would advise against repairing this unit because on the 2G model you cannot replace only the Digitizer. Instead you have to purchase the LCD, the Digitizer, and the glass panel. All in all this totals up to over $100 in parts even if you buy off of eBay.
Don't get suckered into buying only the digitizer because it won't fix your issue because the Digitizer is glued to the LCD and the glass panel.
Your best bet is to sell the unit AS IS for parts or repair on eBay or Craigslist. Alternatively I can offer to buy the unit from you as I have the parts and knowledge to complete this repair and much less than it would cost you to do it yourself.
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SOURCE: my iphone touch screen is not working
i think u have got some water on it or jusy a frozen screen click the turn off button for 5 seconds then click power down.then turn it back on
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