iPod mini not working

So the problem here is my bros iPod mini. The story goes that he accidentally dropped like from height of hips, and it did work fine after that. He listened to his music for few hours, and then decided to make playlist on it. That's when folder with exclamation mark appeared. We tried to restore it in iTunes (on same machine used with syncing it), but it doesn't get recognized in iTunes. Windows (XP sp2) shows it as removable drive, but when I try to access it, Windows Explorer crashes.
So, any ideas what to do next?