On a Treo support site there is a description of how to bypass this for Treo 600 (may also work with 755p):
1) Press and HOLD the 5-way UP navigation control
2) Press and release the reset button on the back of the Treo (in Treo 755p there is no button so remove and reinsert battery to reset)
3) Continue to hold the 5-way UP navigation until the Treo displays the Preferences screen or the Phone application
4) Release the 5-way UP navigation key
This solution pertained to solving a "Reset Loop", but it also serves to bypass the stylus setup screen.
Hopefully by posting a definitive answer to this post, it will save people some time and money. It's certainly an alternative to bricking the unit. The screen is simple to replace, which you should eventually do.
Also, sometimes, debris gets caught between the screen and the casing. Run the edge of a thin piece of plastic (light screen protector thin) bewteen the screen and the casing to remove any debris.
This might help.