I have a first generation 4GB Nano and it stopped working today. It played music fine but when ever I plugged it into my Mac it would say that the iPod is corrupt and that I need to restore the software. When I try to restore the software through iTunes 7, it churns on it for awhile and then says that it can't restore the software.

This is great, it plays and I can listen to the music that is currently on the nano but I can't sync or add new content. I tried a hard reset on the nano but that didn't help. I then decided to see if I could go into the diagnostics screen and reset the nano from there. To get to the diagnostics screen perform a hard reset by holding menu and select, then while the iPod is booting hold rew and select.

I didn't see a test to reformat the iPod but I ran through every test anyways, After that it worked. I don't understand why. I do use my nano all the time so it has seen more abuse then the average user. I should also note that although this happened with iTunes 7, I had been running iTunes 7 for sometime before this happened. I do not think that this is related to the iTunes upgrade.

Either way I am happy that it is back