If Windows, take a look here:
For OS X
Try creating a new account, with admin rights, login to that account
Fire up iTunes
Connect the iPod (you may have to rename it)
See if you can restore from there.
If yes, log back into your regular account and sync your playlists.
I had trouble with my iPod touch that was running OS 2.3 or similiar. When I connected it to my computer I had a notice that a newer software version was available (4.0?), so I attempted to update my iPod. A window opened up that said "Preparing iPod", but it did nothing, even after an hour. I disconected the iPod and reconnected, then I received a message that said "Error 1611. iTunes detecting an iPod in Recovery Mode" and it was recommended to restore the iPod. I click the Restore button, it seems like it starts the correct process until I get the same "Error 1611. iTunes detects an iPod in Recovery Mode. Click Restore to load software." After several attempts, nothing. Any ideas???