Hi,
I had the same problem with MZ-N707
I dont know how it happend but last night I found out what was wrong.
It seems that there are 2 buttons/contacts which says the player that the case is closed.
If only the first button, which I can't locate, is pushed (by the cover) "Charging..." and "HOLD" works but nothing else.
The second button is located between the headphone-output and the mic-input.
I realized that this button isn't really fixed, the soldered connection was damaged --- I had to resolder it while arraging the button, so it is pushed again when the case is being closed.
I really knew what I was doing, because I've education in electrical technology.
Well, I could give you a detailed step by step guide to fix it. But its really hard to solder that mini connections.
If you have warranty left then you should let it be repaired by Sony or your trader.
Hope it still helps you..
Feel free to contact me.