Try resetting iPOD, this worked for me. Had the same problem before in Vista. Googled for solutions which included updating your iTunes application with the latest version and all, got nothing until bumping into this finally. No worries, resetting doesn't mean you're also deleting your precious mp3s, this process just restarts the device just like when you reboot the pc.
To reset iPod, iPod (scroll wheel), iPod (touch wheel), and iPod (dock connector)
- Toggle the Hold switch on and off. (Slide it to Hold, then turn it off again.)
and hold the Play/Pause and Menu buttons simultaneously until the
Apple/iPod logo appears, about 6 to 8 seconds. You may need to repeat
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