My problems seem to be solved by first restoring the iPod. (Shut it off -- press sleep/wake + slide to power off -- then, open iTunes, press and hold the "Home" button and connect it to the computer while pressing and holding Home.)
The restore completed successfully but only when I consulted the document "Error 1604 When restoring iPhone in iTunes" (
http://docs.info.apple.com/article.html?artnum=307007). Basically I had to disconnect my USB devices and connect the iPod to a port in the back of the computer. Once restored the iPod was recognized in iTunes. I reconnected all my USB devices and -- viola -- the iPod touch seems to be alive and recognized by iTunes.
Time for a glass of wine (and some music)!