I know that this sounds sketchy, but there's a guy that I found on Kijiji to fix my old 3G screen after my wife dropped it (I wanted to use it as an iPod after getting my new phone). It cost $50, he does it while you wait, and you just have to take it to his apartment downtown.
There was even a connection problem with my earpiece speaker after the screen was done, so I called him, brought it back, and he fixed it without any fuss or extra charge (as you would hope and expect). By all means, take it to the Apple Store and see what they say, but if you're stuck, it is an option.
You can even buy the parts online and do it yourself, but for the sake of $50, I couldn't be bothered.
Finally, if you do go the jailbreak/unlock route, I did my old 3G using Redsn0w and Ultrasn0w. There is a big thread about jailbreaking that I used as a starting point:
http://forum.calgarypuck.com/showthread.php?t=91212