To completely resore:
Hold power button for 3 seconds
Hold power+home for 10 seconds
Release power, hold home for 15 seconds
If you need help with this, search "how to put iPhone into recovery mode" on my friend's site.
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Once you've don't this, plug you
iPod back into iTunes, click your iPod's nam on the left, then click restore from back-up and choose the latest back-up date. You iPod will now have all the previous settings and content as before and will hopefully work. If this doesn't work, it must be the iPod itself that has broken.