They claimed that it was outside the warranty period. My dear mother had bought it for me and didn't have the invoice which is required if you RMA it. I guess yesterday they received it and saw that it was brand new, not a scratch on it, and they are going to replace the unit according to the email I got this morning.

No the button wouldn't work when the unit was outside the housing. Also the camera wouldn't switch modes unless I hit the front button like 4 times in a row to get off of video mode.