This is exactly what happens every time I load iTunes with my iPod plugged in. This is step by step exactly what happens, error messages are word for word. Don't know how much more specific I could get: error message: "itunes has detected an ipod that may be corrupted. you may need to restore this ipod before it can be used with itunes. you may also try disconnecting and reconnecting the ipod." I click ok. I go ahead and click restore to factory settings. it asks if i'm sure, i say yes, "restore and update." it downloads new iPod software (yes, this happens each time). then it "extracts software." asks me for my admin password. this process ends with the following error message: "The iPod could not be restored because it could not be found." THEN I get the SAME error message about it "might be corrupted." And the iPod disappears from view after I click ok. After a minute, it reappears, same error message, and process begins again. Some background... last night, I moved all my music to an external hard drive. I have no trouble playing it through iTunes, although it says "library can't be saved because it can't be found." I don't know if these problems might be related.
Try setting your ipod to recovery mode, hold the menu+center until the ipod turns off, immediately release menu and press and hold play+center button until you see a check mark on your ipod screen, your ipod is now on recovery mode now open itunes first, wait for itunes done loading, connect the ipod to the pc, once the ipod shows in itunes hit restore, if it doesn't show, ask a friend with a computer to let you restore it on his or her computer, this will erase everything on the ipod but since you already have your files on your own computer this wont matter. once ipod is restored,connect to your PC, is gonna say, this ipod is sync with another itunes do you want to erase and sync, click yes and just wait. Good luck. i hope this works for you.
Also if you do get the Ipod reset think about using something else other than Itunes. Sharepod is a lot more user friendly link below, Yes it is free http://www.getsharepod.com/
