I followed your first instructions and it worked once - Eject/disconnect iPod, quit iTunes, restart iTunes and played the music w/o the iPod connected. Then I connected the iPod again, restarted iTunes, and it still has the problem. Did this all again, and it just gives keeps asking for my password to authorize it again. I can't quite get a consistent problem going here. It varies a lot. But it all relates to this authorizing problem. (although I haven't yet seen that Error 42408 today....yet)
I removed that SC Info folder, but it didn't seem to help either.
Anybody else have other suggestions? This is really quite frustrating.