What is the physical mechanism whereby the touch screen gets flaky
with heat? Is it something in the sensors, is it heat within the
decoding chip(s), or is it an iPAQ on the way out? As far as I could
tell, it was limited to the screen only - the iPAQ itself was fine.

I have had my iPaq 22xx totally lock up and lose its memory. I've also
had it lose contact with the GPS unit plugged into the CF slot. These
problems have not occurred on cooler days.