First I would suggest you make sure the iPod is connected correctly, and that you wait until the iPod has finished updating.
If you are sure of that, you can always restore the iPod to it's original settings.
(I would also suggest that you are using the most updated version of iTunes)
But before you restore your iPod, there are a few steps you can take to try and fix this problem.
If you can’t download a song or other item to iPod nano
The song might have been encoded in a format that iPod nano doesn’t support. The
following audio file formats are supported by iPod nano. These include formats for
audiobooks and podcasting:
AAC (M4A, M4B, M4P) (up to 320 Kbps)
Apple Lossless (a high-quality compressed format)
MP3 (up to 320 Kbps)
MP3 Variable Bit Rate (VBR)
The most common is to reset the iPod.
To do this:
- toggle the Hold switch on and off ( Set it to hold then turn it off again)
- Then press and hold the Center and Menu buttons for at least 6 seconds untill the Apple logo appears.
If this does not work I would consider restoring. This means you will loose all your music,pictures, videos..ect. But from it sounds, you don't have anything on your iPod to loose.
update or restore iPod nano with the latest software:
Go to www.apple.com/support/ipod and download the latest iPod Update. The update
has the latest software for all models of iPod.
Double-click the software installation file and follow the onscreen instructions to install
the iPod update.
Connect iPod nano to your computer and open iTunes. The iPod Updater application
If you’re using a Windows PC and the iPod Updater application doesn’t open
automatically, you can find the updater by choosing Start > All Programs > iPod.
Follow the onscreen instructions to update or restore iPod software.
If you use the iPod Updater application and it doesn’t recognize that iPod nano is
connected to your computer, reset iPod nano (see page 45).
If you want to restore iPod software and you don’t have an Internet connection, you
can use the iPod Updater application that was installed on your computer when you
installed the software from the iPod CD.