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Virus or Hardware issue?

Have been using HTC Hero since September and was very happy with it till yesterday. The touch screen stopped working suddenly yesterday. I restarted, everything was fine for few minutes then again the touch screen stopped working. No matter where I click it always clicks one of the bottom three on screen buttons. After every few minutes the bottom three on-screen buttons start flashing. If I somehow get to the keyboard, random keys start flashing as if they are being pressed. I can still navigate with the trackball without any problem.

I did a factory reset, even reinstalled the ROM (2.73.405.5) but no luck. It works for few minutes then stops working and then if I leave it for a while or try change "Scenes" or "Lock/Unlock" it becomes normal again after 5 or 6 attempts!

Any ideas what could be wrong? I am not sure whether it is a hardware or software issue.

Phone: HTC Hero (GSM, Unlocked)
 
Just tried something suggested for Nexus One in this nexus one thread, i.e.:

"removed battery for at least 2 minutes, I wiped contacts on battery with a towel and then placed it back in and not 1 problem since then"

The phone has been working fine for the last 10 minutes. For the last two days it only took couple of minutes after a restart for the screen to go crazy. So hopefully this will fix the issue.
 
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Naaaaaa... spoke too soon. Phones gone potty again!

One more thing I am begining to suspect Nimbuzz chat application. It seems to have found a cosy little home in my phone. Even after a factory reset and reinstallation of ROM, the Nimbuzz app is the only app that is still there in the "My Downloads" section, albeit in uninstalled state.
 
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One more thing I am begining to suspect Nimbuzz chat application. It seems to have found a cosy little home in my phone. Even after a factory reset and reinstallation of ROM, the Nimbuzz app is the only app that is still there in the "My Downloads" section, albeit in uninstalled state.

That's normal, actually (the "Downloads" section in the market is supposed to be tied to your account). If it's in installed state after wiping, that'd be worrying.
 
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But why only this app? What about the other 30 odd apps I had downloaded, why are they not listed.

Plus I think for some reason a factory reset or even a reinstallation of ROM is not completely wiping everything. An example a person X who is not in my google or facebook contact list. I had stored his number in my mobile and assigned a picture stored in my SD card to that person. So when I factory reset the mobile, the person X still auto appears in the "People" widget along with the pciture I had set before factory reset. There are around 10 people who auto appear in the "People" widegt and i am not sure why. I have only logged into my google account, not the facebook account.
 
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Ok I know why the People widget has those people in it. Android auto updated my contacts with Google. I didn't realize it does that as well. Just checked my contacts on Gmail and the person X was there with the picture I had assigned to him on my phone. Nice feature, though no use to me, as phone is uselss now, cant use it for more than 5 minutes.

I have factory reset the phone again and this time i have not added my google information. Now at least the phone should act as a simple not so smartphone. Lets see if the problem persists.
 
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Hi, I've had the same problem but something funny happened. As preparation for a factory reset I removed the sd card...and guess what! the screen became responsive again.

I haven't yet inserted the sd card back in yet but at least I know its a software issue and not a hardware one...i'll have some wiping to do..and I got a feeling it may be one of the word or pdf programmes i installed.

I'll let you guys know how I got on.
 
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