The standalone iPod updater program is either for the iPod shuffle or it is an old program from before iTunes had the functionality. Depending on which version you downloaded, it may or may not support a 4th gen iPod.
My wife's iPod is recognized by iTunes on my computer so it is not the program or my USB connection.
Have you tried connecting your iPod to her computer, if you use different computers?
Try putting the iPod into Disk Mode first
http://support.apple.com/kb/HT1363
then connecting it to the computer. See if iTunes now recognizes the iPod. If so, use the
Restore button to erase the iPod and initialize the iPod's software. Note: If you use
Restore on a 4th gen iPod with a USB connection, it will ask you to connect it to a power adapter as the last step in the
Restore process. Therefore, you need to have the white square power adapter that came with those iPods (or something equivalent).