A post on the Kindle forum says: "just talked to CS...for anyone else who has a frozen screen due to battery...let it charge for a while. But then UNPLUG it. The kindle 2 will only rebooot if unplugged.. hold the button for 20 and then wait about a minute. It should unfreeze, then you can plug it in again. "
No-one has said that's worked though
- but it might be worth trying before sending the unit back..