Hi Jjonesj,
As mentioned in the above reply, you may only need to update the iPod. Meaning, if updating it gets the iPod up and running again, you won't need to restore it to factory settings.
If the only option is to restore it, then you will not be able to back it up before doing so. The only way to get the data from the device would be to restore it from a backup that was created before this issue began, if that's an option.
From the above article: If the Restore screen appears on your iPhone, iPad, or iPod touch
If the Restore screen still appears after you restart
If the Restore screen still appears after you restart, you need to reinstall iOS or iPadOS:
1. On your Mac, make sure that you've installed the latest software updates (including iTunes if you have MacOS Mojave or earlier). Or on your Windows PC, make sure that you've installed the latest version of iTunes.
2. Make sure that your device is still connected to your computer. A "There's a problem with the [your device name] that requires it to be updated or restored" message should appear.
3. Click Update (not Restore) to reinstall iOS or iPadOS and keep your personal data. Don't disconnect your device from your computer until the update finishes.
If needed, here's information on how to restore from a backup: Restore your iPhone, iPad, or iPod touch from a backup
Hope that clears things up.
Cheers.