I too get the same dialog after setting up my 1.0 firmware 3rd generation Shuffle with the default (i.e. including Voice Over) checked. I also let iTunes 8.1 create a selection that would fit, which uncheck 4 of the 6 checkboxes when the Shuffle is selected:
- Sync Only Checked Songs
- Convert Higher Bit Rate Songs to 128 kps
- Enable Disk Use
(I left Enable sound check, and Manually manage music unchecked)
So, only the first box remained checked, as it was by default: "Open iTunes when this iPod is Attached"
I went ahead and Reset All Warning in the Advanced pane of the Preferences dialog but left the Recently Played "smart playlist" at 2 weeks. I then click on OK on the dialog box in the first posting.
Despite the error, the Voice Over was installed, the selection of right size created, and syncing is being performed. Perhaps it just has to "burp" first (pardon the vernacular), as new software (and old) can always have errors that have little relationship to their wording. It should be otherwise, but based on the different approaches in 10 replies and 7 other threads, look at the variety of fixes!
My least favorite errors are those that silently fail. An action is initiated, but doesn't occur, and there's no error message. An example where info would be helpful is the infamous "Disk is in use" - can't eject - but the OS doesn't tell you by what. I would give 5 to 1 that some layer knows, and somebody thinks or doesn't, that it's OK not to tell. Frustrating.
Anyway, it would be interesting to hear if this is simply an annoying message that doesn't really block anything, or leaves some functionality out, until a firmware patch comes out (1.0.1?). Is it just me, or is Apple getting a little lax on their 30 year history of fabulous releases and bridges? Sorry, just calling it like I see it. There have been a host of problems since top mgmt changed and left.