Solved! So I opened my iPhone 3g..

[Noez]

..and I can't figure out where this piece goes. I'm guessing near the power button because it's no longer functioning correctly (unable to push it down). Here are some pics

Anyone know where this piece fits?

 

[buwish]

Have a look here and see if their tear down helps out:

http://www.ifixit.com/Teardown/iPhone-3GS-Teardown/817/1