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Check out this step by step solution, it may help? http://support.apple.com/kb/TS1373
Is your ipod covered under warranty? If so following the process above and get it into the Mac store, if it's not check out this company...whiteboxservice.com. White Box fixes broken ipods out of warranty.
If it is showing a red circle with an X inside, then it means it's hardware issue. If your ipod is under warranty, then you can either call AppleCare and they'll setup a repair or go to nearby Apple Store to get a replacement. If you're going to Apple Store, then make sure to call AppleCare first to schedule an appointment to meet a tech.
If your ipod is not under warranty, then you can still setup repair but you've to pay the repair fee and that would be around $150 + taxes. I hope that answers your question.
This is generally caused by a hardware failure. If it's under warranty, send it back to Apple. Otherwise, you need to start looking at replacing the hardware. If the screen shows a sad face, then you can assume the screen and battery are probably OK. So, the problem is probably with the hard drive or the logic board.
Check this link for some steps that you can do in solving this sad face on yoru Ipod because this sad face only tell us that's there's a hardware problem with the Ipod , after you have done all the step from the link and still have the sad face bettre take the Ipod to a service center and if its still under warranty have it replace, http://www.scribd.com/doc/13035/I-get-the-sad-face-iPod-on-the-screen-of-my-iPod-