Sounds like your digitizer has failed. I had the same problem with my Vogue. You can still re-lock your device and load the stock rom for return, if you did unlock it. If you dont have warranty, you can order a new digitizer for $8 here:
http://cgi.ebay.com/Phone-Touchscree...item3efb6068a9
Or you may want to get the digitizer and housing assembled to make life easier:
http://shop.ebay.com/?_from=R40&_trk...sing+digitizer
Here you can find the Htc Touch Service manual:
http://mikechannon.net/PDF%20Manuals...-%20Elf%20.pdf