I managed to get my iPod working again, by restoring it from a different Mac with iTunes 7.0. Here’s a recap of how to restore an iPod if this ever happens to you.
1. First thing to try is resetting the iPod, by toggling the hold switch on and off and immediately pressing MENU and the center button. At this point, the iPod should reboot. In my case, it kept rebooting continuously and wouldn’t appear in iTunes or on the desktop.
2. If it still doesn’t appear, after resetting it, as soon as the apple logo appears, hit the center button and PLAY to put it in disk mode. It should then be visible on the desktop, and if you’re luck, in iTunes. At this point you should be able to restore it from iTunes. In my case, iTunes would crash immediately when I tried to restore it.
3. As a last resort if everything else fails multiple times, and if it doesn’t appear in iTunes, run Disk Utility and format it. At this point, you should be able to restore it in iTunes. Unfortunately iTunes 7.2 would crash immediately on my MacBook Pro. All you can do with the iPod now is restore it – the iPod will display a white screen telling you to connect it to a computer to restore it, and iTunes will recognize it as being in recovery mode and tell you to restore it. If you can restore it now, you should be OK. I ended up using a different Mac at work running iTunes 7.0 and I was able to restore it and get it working again.