A program called RiverPast will convert the WMV to MPEG-4 for the iPod www. riverpast .com is the website
For freeware you could try MeGUI or AVIDemux. Both would require that you use AVISynth with directshowsource() for input. Could also use mencoder to output a raw 264 or m4v stream, use mplayer to decode the audio and NeroDigitalAudio to encode, then mux with yamb/mp4box. Numerous different ways you could do it completely with freeware tools.
Did you try AoA iPod Converter? It's very easy to use. Here is the link. You can download a free trial for test. http://www.aoamedia.com/ipod-mp4-converter.htm