The digitizer is a piece of hardware: it's part of the LCD assembly and handles touch input.
It's hard to guess how much it would cost to fix. If it's really a problem with the digitizer, Palm would replace the LCD which probably costs $100 or more. If it's simply a bad cable connecting the LCD to the motherboard, it would be cheaper.
Have you tried a hard reset to see if the touch screen works correctly? I'd do that first before considering repair or replacement.
-------------------- Lisa Gade Editor in Chief, MobileTechReview