To ultimately resolve the problem your iPhone Touch screen needs to be replaced. There is a guide that teaches you the replacement step by step:
http://www.portatronics.com/guide/iPhone-Repair-Guide/ .
Some people report success with below method that increases the sensitivity of the touch screen.
You will need to overwrite your general.plist located in Applications/preferences.app
The default sensitivity on the iPhone’s touchscreen is 3.5. You have the option to set it from 0-16, where 0 is the most sensitive. Recently I have had a few issues with my touchscreen and applied this modification and everything is working 10x better.
This hack may work for the majority of iPhone users, but there may be a few that will need to replace their LCD completely.
You add the code below to the General.plist:
<dict>
<key>cell</key>
<string>PSLinkCell</string>
<key>label</key>
<string>Touch</string>
</dict>
Yost edited the General.plist file, for people who have a dead strip on the top of the screen, so that the touch option is now on the bottom right under “reset” under pref>general>touch.
You need to find the General.plist for your firmware and or upper deadstrip low dead strip. Do some search engine work on this one and how to transfer the file into you iphones file system and it will show up.