Reset it. 
FYI, iPods usually are problematic - my old mini 1g is very old and is not working correctly. maybe its time for a new player 
If resetting equals holding menu+seleÑt - it doesn't work with rockbox loaded.
Of course it's easier to buy a new one. I'm trying to make it work not for profit but for fun

Sounds like there is a problem with your select button. Does that work properly when running Rockbox?
Yes, everythong works as expected before ipod goes to sleep mode.
I think it might be useful to log all the keypresses somehow (as i understand it from the source code ipod doesn't turn off completely, it goes to an infinite loop waiting for some hardware interrupts), but i'm not familiar enough with C / firmwares to make this changes and check =)
Great work anyway, i really like this firmware =)