Had a similar problem. No flashing backlight, but after not using the Nano for about 12 hours, I took it out of my backpack, and no matter what it did, it wouldn't do anything. I could see the screen was on, but it was frozen on the big checkmark and the 'Disk Mode' thing in the title bar. Tried to reset, but it didn't work. Backlight wouldn't go on at all. Checkmark wouldn't go away no matter how many buttons I pressed. Fiddled with the lock button -- on, off, on, off, etc. -- but that didn't do anything. Tried to reset several times, no go. All it had was "Disk Mode" in the title bar and the after-sync checkmark in the display.
I was able to sync it to my computer, run the updater, and restore everything to factory settings.
Very weird. Now it works fine.