Rogers Xenon Suddenly Experiencing Huge Lag

All of a sudden my Rogers Xenon is REALLY lagging for all applications.

I was playing an MP3 file through the music player that came with the phone through a bluetooth headset. I've done this hundreds of times nothing was new about the operation.

Suddenly the sound stopped but wasn't playing through the speaker. I tried to reconnect it but it said "reject ear jack first". The ear jack is NOT connected.

The only other thing I can think of is that moisture may have got inside the phone because it was raining (though the phone was not exposed directly to rain).

It also won't connect asa a USB drive now using the cable.

I tried cold booting but didn;t know what else to try. Any thoughts?