do you mean the button on top where you can also press on w/ the home button to reset the phone if necessary? you could try apple but thats exactly what happened to me and i just upgraded to the iphone4
cos my safari browser would freeze and not work, but the rest of the phone functions would be fine, and i couldn't close/reset so i had to wait for the battery to drain out before plugging it in to reset. was a PITA
other then that, and having to wait for the screen to dim and sleep itself, it wasn't a big deal
you can live w/o it working properly (if apple doesn't fix it, they might but might charge you too since its cos you dropped it and not a defect)