Hello my ipod touch 1g did this one time. i restored my ipod to a earlier firmware and it started working again. I usually restore mine everytime something like that messes up and it always fixes it. You can do this by connecting your ipod to your computer and go to itunes and wait for itunes to find your ipod and then click on your ipod like you would sync it then click restore your ipod.
I also upgraded back to the latest firmware version a few days after i downgraded and it hasn't messed up again.