My 5th gen IPod's screen has a black smudge on the inside. It was dropped recently and now it doesn't power on?

When you have a dark spot on a LCD screen, that means that the screen is cracked and bleeding and needs to be replaced. The iPod probably still works-can you hear the hard drive spinning? Since you have already taken it apart, (no harm done there) buy a replacement LCD and install it. Look on eBay.