Ok, things to do while you're working this out.
Use a USB mouse (wired or dongled) and a USB OTG adapter.
Or use a Bluetooth mouse if you can get it paired.
Make sure ADB (USB debugging) is on.
If you're rooted, try:
Code:
adb shell cat /dev/input/event1
It should spew out garbage when you doodle the screen.
Is this version 3.3.2 now?
It could be a hardware failure of the capacitive touch.