In the top there is a menu that has The File Tools etc. UNer tools (i think) there is a preferences tab. Im not sure of its preferenceor options i often get it confused. From there you go to ipod i believe and select photos, you choose your options from there.

HOWEVER,with that said, if I were you I would return the iPod and get the Creative Zen Vision: M. I have had so many problems with my iPod photo I will NEVER buy another iPod/Apple/Mac Device. Just a heads up