Plug it in with itunes closed
Once it shows up under my computer, you can right click the device and format.
In the format settings change the allocation size to Default allocation size and then do the format. This will WIPE THE DEVICE... But once its done, you should be able to plug into itunes and restore it and get it up and running again. Then sync your music back onto the device and hopefully its all working great.
If still having issues there may be a hardware issue such as bad hard drive, or faulty dock connector.
Hope This Helps!!!