What software is it that's not registering clicks? Do you mean the iPod doesn't respond to clicking the clickwheel? And what "reset thing?" Do you mean that you can reboot the iPod by holding the center and menu buttons?
I would suggest first restoring the iPod using iTunes or Finder. Then (if your 1st gen is like my 2nd gen) you can run the onboard diagnostics. To get to the diagnostics, first simultaneously hold the center and top (menu) buttons until you see the Apple logo appear in the display, then immediately hold the center and left (rewind) buttons until the diagnostics menu appears. Navigate the menu using the left (rewind) and right (forward) buttons. Select menu entries using the center button. Of course, if the clickwheel is bad you may not be able to navigate the diagnostics menu, but, if you can, one of the tests is for the clickwheel. To leave diagnostics mode, reboot by holding the center and top (menu) buttons until the Apple logo appears.
Some iPods (like my 4th gen Photo) can't directly get into diagnostics mode, and you have to first put the iPod into disk mode. To get into disk mode, first hold the center and top (menu) buttons until the Apple logo appears, then immediately hold the center and bottom (play/pause) buttons until you see the disk mode indicator in the display. Then you can try to get into diagnostics mode as described above.
