I am on my second Lilliput, and I think the touchscreen just crapped out on it, too.
Both worked flawlessly for a few days, and then all of a sudden, the right side of the touchscreen didn't work.
I ordered it from the mp3car.com store and ziplock replaced it with no problem. I didn't open it up, though... That's a no-no.
I just emailed him again to see if I can exchange it for a Xenarc if I pay the difference.
In my opinion, Lilliputs SUCK, but I also haven't had any experience with Xenarcs.