sleep/wake button is loose and wont work, need help!

Niko,

First off how long have you had it? I would try taking it to Apple regardless. I know several people that took in broken screens etc. that were out of warranty and the Apple store replaced them no problem!

If not you need to carefully disassemble it. In order to fix it you have to take it all the way apart which usually means you will have to replace the front panel assy. Follow the teardown guide here:

iPod Touch 4th Generation Teardown

Step 23 shows the button top right. there are 2 screws holding it in place and secured with blue loctite thread sealant. See if these are loose and get them tight. If they are not you have a different problem.