Your digitizer is bad, trust me. most likely its moist beneath.

That's what I figured. Guess I'll be replacing that soon. I wish I could just buy a N9, but I'll have to look for one though a 3rd party retailer here in the US.

I would advise against that, i've seen too many complaints of people that never got a N900 back; Nokia isn't making any more N900s and they decided the lesser newer models are acceptable replacements.

You just don't get a N900 back, if sth. on the Mainboard is broken, i had the same problem with the digitizer on my N900, someone already saidso: play around in sketch, when you click somewhere and you see a line drawn instead of a dot, your digitizer is either defect, send it to Nokia, i did the same here in Germany, after 4 Days i got my phone back with a new front Display/Digitizer, it was ~ 2 weeks ago!

Finally got a new digitzer in, and still having the same problem. Any other suggestions?

My N900 has the same problem. Have you managed to fix yours?

I just did a touchscreen replacement. It's not the easiest thing to do, there are little clips that need to be separated from the bezel assembly once the screen is apart. But if you've done one you'll already know that.
My guess is a LCD cable problem.