You can't deauthorise 'dead' installations or computers you no longer have access individually. However once you reach the limit of 5 authorisations you have the option to deauthorise them all in one go from your iTunes account and start over. *Just note that you can only use this option once a year*:
About iTunes Music Store Authorisation and Deauthorisation
I suspect that the message you are seeing is not to do with computer authorisations but is because your original library was on another computer and the iPod was syncronised with that. If it is set to sync automatically you would be getting a message that it is linked to a different library and asking if you want to link to this one and replace all your songs etc, press
"Cancel". Pressing "Erase and Sync" will irretrievably remove all the songs from your iPod.
When your iPod appears in the iTunes source list change the update setting to manual, that will let you continue to use your iPod without the risk of accidentally erasing it:
Managing content manually on iPod and iPhone
Once you are connected and your iPod is safely in manual mode there are a few things you can do to restore your iTunes from the iPod. iTunes will only let you copy your iTunes Store purchases directly from an iPod to the computer, you'll find details in this article:
Copying iTunes Store purchases from your iPod or iPhone to a computer
For everything else (music from CDs, other downloads etc.) there are a number of third party utilities that you can use to retrieve the music files and playlists from your iPod. I use Senuti but have a look at the web pages and documentation for the others too. You can read reviews and comparisons of some of them here (you'll find that they have varying degrees of functionality and some will transfer movies, videos, photos and games as well):
Wired News - Rescue Your Stranded Tunes
Comparison of iPod managers
A selection of iPod to iTunes utilities:
Senuti Mac Only (iPod Touch & iPhone compatible)
expod Mac Only (iPod Touch & iPhone compatible)
PodView Mac Only
PodWorks Mac Only
TuneAid Mac only (iPhone and iPod Touch compatible)
YamiPod Mac & Windows
iPod Music Liberator Mac & Windows (iPhone and iPod Touch compatible)
iPodRip Mac & Windows (iPhone and iPod Touch compatible)
iPod Music Liberator Mac & Windows (iPhone and iPod Touch compatible)
iGadget Mac & Windows (iPhone and iPod Touch compatible)
Floola Mac & Windows
Music Rescue Mac & Windows (iPhone and iPod Touch compatible)
iRepo Mac & Windows (iPhone and iPod Touch compatible)
iPod Access Mac & Windows (iPhone and iPod Touch compatible)
TouchCopy Mac & Windows (iPhone and iPod Touch compatible)
There's also a manual method of copying songs from your iPod to a Mac or PC. The procedure is a bit involved and won't recover playlists but if you're interested it's available on page 2 at this link:
Copying Content from your iPod to your Computer - The Definitive Guide
Keep your iPod in manual mode until you have reloaded your iTunes and you are happy with your playlists etc then it will be safe to return it auto-sync.
I would also advise that you get yourself an external hard drive and back your stuff up, relying on an iPod as your sole backup is not a good idea and external drives are comparatively inexpensive these days, you can get loads of storage for a reasonable outlay:
Back up your iTunes library by copying to an external hard drive
