I used to have a drip in my shower, and a washer used to fix the drip. Yesterday I couldn't turn the hot water off. I finally had to shut it off at the hot water heater and that's left me without hot water all day. I tried to tighten, fix the handle that is causing the drip but now when I tighten on the valve anymore a drip back in the pipe and joint starts (back in the wall see red arrow -what I tightened and removed to replace washer. Red Star is where its starting to leak if I tighten that valve too much.)

Probably the packing washer needs to be replaced, but from the looks of it the entire stem should be replaced. The stem needs to be smooth in order to seal properly.

Take the stem to the hardware store. They should be able to match it up.

They should also have a packing nut, but you'll have to buff that stem quite a bit.