"The problem occurs with headphones which have a metal disk around the plug, which seem to include most of the higher end 'phones, . It's probably because the metal disk is touching the metal back of the ipod... but at any rate, a quick and dirty fix is just to take a small piece of plastic wrap, punch a tiny hole in it and run your headphone jack through it... sort of a broken iCondom.

So your plug is sticking through the plastic, but the metal base is still covered by it. I just gave it a try and I'm listening to my ipod pause free, no matter what position the plug is in. Give it a try. Much better than continually returning ipods, or giving up your good 'phones. I might try putting some clear nail polish or something on the ipod around the headphone jack, or on the disk around the plug, since the plastic will tear off fairly quickly... but it works for now"