Step 1: Finding My Computer.
Step 2: Finding the iPod in My Computer
Step 3: Checking the iPod
Step 4: Opening Task Manager
Step 5: Ending Processes
Step 6: Going back to My Computer
Step 7: Formating the iPod
A. This should show an accurate capacity. If it reads something like 1 terrabyte then the hard drive/flash drive is bad.
B. You have to be able to select FAT32 as the file system. If you can't then again the hard drive/flash drive is bad.
C. Allocation size should automatically be set to default. If you can't select an allocation size then the hard drive/flash drive is bad.
D. Now select quick format, and click start.
Once this has been done it should show up in iTunes as a corrupt iPod. Restore the iPod at this time and this should finally resolve the problem. If you are still encountering a problem visit http://www.irepairsquad.com/ and have us diagnose the iPod for free.