I've read more than one or two threads on power button issues, and I know what I'm talking about. My power button DOES power up the phone when the battery is taken off the first shot, it DOES wake the phone from standby, it DOES register long presses - there was even one time when a second press was long, and suddenly the screen woke up with power menu, while the first press left it dark with touch button light going on.
Doesn't look even a bit like HW to me. HW would leave the phone dead, non-responsive to touches, or create a loose touch which would translate into several touches - none of those would EVER turn into a phone being on with screen off, and suddenly snapping back to screen on when the SCREEN is touched several times.