The chunk idea isn't bad. Despite the number of retracts/reallocs, if the problem is with a corrupt file rather than the drive, that'll narrow it down pretty quickly. If you remove files that seem to cause problems, but then you start to see problems again once you exceed a certain amount of storage space, then the problem is almost certainly the drive.
As to what those numbers mean:
Retracts refers to the number of times the hard drive's read/write heads have "retracted", or moved away, from the drive platters, usually from an unplanned power-off. I'm not quite clear on what the consequences of this would be to the drive.
Reallocs refers to reallocated sectors. When a modern hard drive encounters a read/write error on a particular sector, the drive's controller will mark that sector as "reallocated" and move the data to a new area of the drive. A large or climbing realloc number is a pretty clear indication that something problematic is happening to the drive.
The third number, pending sectors, refers to sectors that the drive plans to reallocate because it has had some difficulty with them, but hasn't had a chance to actually reallocate for whatever reason. A high number here can also indicate potential problems.
The power on hours number, to the best of my knowledge, refers to the amount of time the hard drive has actively been spinning, not the amount of time the iPod has been used. As you've probably noticed, the hard drive will spin up for a very short period of time, load the data it needs into RAM, and then spin down. My own 80GB iPod classic, which is over two years old and has seen moderate use, has 56 power on hours.
The number of retracts/reallocs I gave as indication of a problem aren't any kind of scientific or official determination, but a personal threshold, based on my own experience, which is that generally, when people come to me with weird sync issues on a hard drive-based iPod, SMART will almost always indicate issues with the drive. It sounds kind of like circular reasoning, but the correlation is there.
What causes these hard drive issues? I don't know - I'm not an engineer. When you consider the tolerances of the parts inside a hard drive versus the external forces that come into play when moving around with an iPod, I'm sometimes amazed the drives survive a day, much less years.
One last note, which is if you just purchased your iPod new this past June, jbkenney, it should still be under warranty.
Shawn