This guide was tried and tested on a K800i, I dont know whether it works for other phones, but I can guarantee it will work with a K800i
After following this tutorial your joystick should work like new
Step 1: As seen in the picture below, insert a toothpick directly in the position in the picture, make sure you insert it EXACTLY as seen below, then lever the toothpick downwards until you hear a small "click"
Now you should be able to remove the keypad assembly
Step 2: Lift the joystick out, you'll have to tug at it, but it should come off, and reveal a smaller joystick benaeth it, which will be full of dust
Step 3: Clean inside the "compartment" till you have something similar to this:
Step 4: Take some lubricant, for example some petroleum jelly, vaseline, or WD-40, and apply some to the tip of the toothpick, then apply some of it to the phone as shown below:
Step 5: When assembling the phone back together, make sure you insert the two "lips" of the clip downwards facing the "2" key:
If this hasn't worked for you, its because you havent "worked" the lubricant into the phone yet, turn the phone off, and circle the joystick 100 times clockwise, then 100 times anticlockwise, turn the phone back on, and now it should be like new
don't have one at the moment, but I work in the mobile phone business and I come across people having this problem a lot. I usually just advise them to make use of the warranty but some people don't want to loose their phone for like 2- 3 or more weeks.. So with their permission I can try this sometime.
Believe me, ive had over 5 sony ericsson phones in the last couple of years, and this problem happened to all of them, I sent one of them off for repair to sony and they sent it back saying it was a battery fault. warranty on phones is a con, my nephew was robbed on the way home from school, when i rang the warranty company they said "well, its not our problem, he should have walked a different route".
fixing it yourself is the best alternative, and furthermore, it is free and easy to do, only takes 2 minutes :)