Plug it on your computer, wait for iTunes to recognize it. It will probably tell you it's disabled, but fear not! While still connected, hold the Power and Home button for about 10 seconds, until the screen goes completely back. When this happens, immediately release the Power button, but still keep pressing thew Home button. iTunes will eventually detect your iPod, and will tell you it is in recovery mode (DFU mode). You can let go of the Home button when this happens. Now, you need to Restore your iPod in iTunes. Just click on restore, it will download the software, and restore your iPod. Your iPod will no longer be disabled. BE WARNED, you lose ALL data on your device.

From your description I assume your screen is totally gone. When batteries expand, they very often lift up the screen, pushing it out of its plastic frame, and in many cases damaging the screen assembly until a point of no return. I suggest that you get your hands on a screen that you know is 100% functional, and try your phone out with that new screen. If it works fine, then your screen is damaged and needs to be swapped out, what I strongly suspect is the case.

It will no longer be waterproof, unless you are using the exact same quality and amount of adhesive as the original one, and you press the back glass to the phone as hard as it was before.

If not, then it is hardly waterproof.