These Motorola says to use a #00 phillips but IMO a #000 fits a little deeper into it. I make sure to a)press down hard b) make sure I'm pressing down at exactly a right angle. It's a tough job. Motorola DROID repair Wait I just saw Doug's first post..they are "thread forming?" That sounds suspiciously like "self-tapping" which would make sense as far as how tight they are in there. Whenever I take them out there is bare metal on the threads, even though the screws themselves are black. Steady, hard pressure downward with a #000 bit using T-handle thing I created myself is the key, since I started using this self-made tool I haven't been unable to remove these screws and re-use them.
It lines up with the hole in the bottom of the phone. That's the long rectangular rubber part. The round part actually pressure fits over a round thing near the bottom of the motherboard. Once you find it it will make sense because it will fit perfectly around the round thing and extend exactly to where the hole is on the bottom of the housing. It's a pain in the butt to get back on, especially when I reassemble the phone and I look down and see it sitting in my parts dish still, I'm like FUUUUUU-
I suspect that you do indeed need to replace the LCD in order to fix your problem. Find a place like Inovagent Cell Phone Repair to do it if you're not comfortable doing it yourself. (Note: not an ad, Inovagent is mostly local)
I work on broken iPods all the time and we get water damaged iTouches in all the time. The backlight is built into the LCD and we'll try an LCD but the vast majority of the time, there is some kind of short in the motherboard that affects the backlight circuit. Your situation sounds all too similar...there isn't anything you can do at this point, I'm sorry to say.