apple will repair it, but its not going to be cheap..
apple set the prices for replacement parts when each new ipod comes out.. and these prices do not change.. so eventually it becomes cheaper to buy a new ipod, than to say replace just a screen!
you could see if there are any 3rd party companies that might fix it for you.. providing they can get hold of the parts.. i would recommend looking at a local market, or try some of the local mobile phone shops... these types of places will usually do repairs like this for half the price apple would..